ABB India shares now have more 'sell' ratings than 'buy' after slew of downgrades

Shares of ABB India Ltd. will be in focus on Monday, May 11, after a series of brokerage downgrades followed the company's weaker-than-expected March quarter earnings.

The stock now has more 'sell' ratings than 'buy' recommendations after multiple brokerages turned cautious on the stock. Of the 32 analysts tracking it, 10 have a 'buy' rating, eight recommend 'hold', while 14 have a 'sell' call.

Brokerage firm Macquarie downgraded the stock to 'underperform' from 'neutral' and cut its target price to ₹5,470.

The brokerage said ABB India's Q1 earnings came in significantly below estimates, with EBITDA and profit after tax declining 27% and 25%, respectively, despite a 6% rise in revenue. EBITDA margins contracted 580 basis points year-on-year due to slower execution, higher input costs, adverse revenue mix and forex movements.

Macquarie added that margin recovery may take longer than expected. While order inflows rose 25% year-on-year, the growth was aided by a large order, while base order growth remained slower at 9%.

The brokerage has cut EBITDA margin estimates by 50 basis points each for CY26E, CY27E and CY28E, while lowering PAT estimates by 6%, 6% and 8%, respectively.

Jefferies also downgraded ABB India to 'underperform' with a target price of ₹5,915.

The brokerage said that the company restated its March quarter financials following the sale of its robotics business. Excluding the robotics unit, EBIT missed estimates by 29%, while EBITDA margins fell 576 basis points year-on-year to 12.8% due to weak gross margins and the inability to fully pass on rising commodity costs.

Jefferies believes industrial capex growth, excluding the power transmission and distribution segment, is likely to remain subdued, making a recovery to ABB India’s earlier margin levels of 18-19% difficult.

Other brokerages also turned cautious on the stock. Prabhudas Lilladher downgraded the stock to 'hold' from 'accumulate' with a target price of ₹6,523. Nuvama Institutional Equities
downgraded the stock to 'reduce', citing expensive valuations of 66x CY27E PE, and a target price of ₹5,860.

Motilal Oswal Financial Services also downgraded the stock to 'neutral' from 'buy' with a target price of ₹6,600.

BofA Securities maintained an 'underperform' rating with a target price of ₹4,764. The brokerage highlighted that ABB India’s ex-robotics revenue growth slowed to 6% year-on-year, missing its estimates by 4.3%. Margins contracted 576 basis points due to raw material inflation and adverse revenue mix, despite strong order growth of 25%.

BofA also cut estimates factoring in margin pressure and the robotics business divestment, while noting that valuations remain expensive.

Citi maintained a 'sell' rating with a target price of ₹5,200. The brokerage said EBITDA fell 19% year-on-year and was 16% below estimates due to weaker margins.

Citi attributed the margin miss to commodity inflation, rupee depreciation, competitive pressures, selective price cuts and execution delays linked to the Middle East conflict. While order inflows remained strong at 25% year-on-year, Citi believes the optimism is already priced into the stock.

ABB India said its margins were impacted by raw material cost inflation, while the automation segment saw weaker and slower execution.

The company added that order inflow growth was driven by segments such as data centres, railways, renewables, utilities and infrastructure. ABB India has also completed the sale of its robotics business.

Shares of ABB India ended 2.48% lower on Friday at ₹7,010. The stock is still up over 35% so far this year.