- Revenue rose 5.7% YoY in Q4 CY25, signaling a rebound in order intake.
- Adj. EBITDA margin fell 521bps due to commodity inflation and QCO material costs.
- Management targets double‑digit revenue growth and 12‑15% PAT margin by CY26.
- Data centers now represent ~11% of the order backlog, a structural growth catalyst.
- Current valuation: 63.5x CY26 EPS, 54.4x CY27 EPS – still pricey but supported by a robust pipeline.
- Peer comparison shows ABB outpacing Tata Power’s margin recovery but lagging Adani’s capex surge.
- Bull case hinges on private‑capex revival; bear case rests on persistent import cost spikes.
You missed the fine print in ABB India's earnings – and that could cost you.
Why ABB India's Margin Compression Matters for Your Portfolio
Adjusted EBITDA margin shrank by 5.21 percentage points YoY, driven primarily by soaring commodity prices and the impact of Quality Cost Optimisation (QCO) on material costs. While top‑line growth looks promising, margins are the real health metric for industrial firms. A widening gap between revenue and profit can erode earnings per share (EPS) growth, especially when the company is trading at a forward P/E north of 60x. Investors need to monitor whether margin pressure eases as the supply chain normalises or if it becomes a chronic drag on profitability.
Revenue Growth Drivers: Power, Data Centers & Motion
ABB's order book is anchored by three pillars:
- Power generation & transmission: Large‑scale projects are back‑filling after a slowdown, offering a steady revenue stream.
- Data centers: Accounting for roughly 11% of the backlog, these facilities demand high‑efficiency power and automation, aligning with ABB’s end‑to‑end solutions.
- Electrification & motion: Propulsion systems for railways, drives, and large motors are benefitting from government push toward electric mobility.
The convergence of private capex revival and policy‑driven electrification underpins the company’s guidance for double‑digit growth. However, the timing of project execution remains lumpy, with some customers deferring decisions.
Peer Landscape: How Tata Power and Adani Compare
When benchmarking ABB India, two domestic power giants provide useful context:
- Tata Power: Recently reported a margin recovery to 14% after a costly fuel price spike, but its revenue growth is slower (3% YoY) compared to ABB’s 5.7%.
- Adani Energy: Riding a wave of aggressive capex, Adani’s top‑line grew 12% YoY, yet its margins hover around 10% due to higher debt servicing costs.
ABB’s higher margin trajectory (targeting 12‑15% PAT) positions it competitively, provided it can translate order inflow into earnings without the material cost headwinds that have plagued its peers.
Historical Parallel: ABB’s 2020 Cost Surge and What Followed
In FY2020, ABB faced a similar cost inflation cycle driven by raw material price spikes. The company responded by accelerating its digital services segment, which helped offset margin erosion and returned to 13% PAT margin by FY2022. The lesson: diversification into higher‑margin services can cushion commodity‑driven shocks. Investors should watch for any acceleration in ABB’s digital and automation services, which carry better pricing power.
Technical Snapshot: Decoding P/E Ratios and EPS Revisions
Prabhudas Lilladher lifted EPS estimates for CY26/CY27 by 5.6% and 6.2% respectively, reflecting stronger order visibility. The forward P/E of 56x (Mar‑28E) suggests the market is pricing in continued growth, but also leaves limited upside unless earnings accelerate beyond consensus. A price target of ₹6,319 implies a roughly 10% upside from current levels, contingent on margin recovery and sustained order flow.
Investor Playbook: Bull vs Bear Scenarios for ABB India
Bull case: Private‑capex picks up, commodity prices stabilize, and ABB successfully monetises its data‑center and automation services. Margin improves to the high‑end of the 12‑15% PAT guidance, pushing EPS higher and justifying the premium valuation.
Bear case: Imported material costs remain elevated, QCO measures fail to contain expenses, and project deferrals linger, keeping margins under pressure. A slower‑than‑expected revenue ramp could force the stock into a valuation contraction, eroding the target price.
Given the current risk‑reward balance, the “Accumulate” stance remains appropriate for investors with a medium‑ to long‑term horizon, while staying vigilant on margin trends and macro‑commodity dynamics.