The Street's worry stems from limited revenue visibility and a soft near-term outlook amid lack of clarity over restart of the domestic economy and continuing global uncertainty due to Covid-19. Moreover, ABB is suffering more due to the short-cycle nature of orders, which otherwise remained its strength, but is now hurting its revenue and order book. Order backlog as of June 30, 2020, at Rs 4,671 crore is flat YoY, and is roughly equal to a year's revenue.
Analysts, however, are hopeful and say that ABB will be among the few to rebound fast as the economy revives, given the significant opportunities in the industrial space, railways, metro rail, hotels, and food & beverages, besides industries looking to increase automation. Electrification segment outlook also remains decent and robotics will see opportunities from pharma and F&B.
Umesh Raut at YES Securities, who has a buy rating, said that the postponement of major capex to subsequent quarters due to Covid has led to a greater focus on plant upkeep, optimisation, automation and digital solutions, which should augur well for ABB.
What's more, June and July have seen double-digit year-on-year growth in order inflows/revenue, say analysts. Based on the trend, Motilal Oswal Securities has increased its CY20 and CY21 earnings estimates by 12 per cent and 6 per cent, respectively. Yet, even though ABB has tracked the Sensex since May lows, valuation at 76 times trailing 12 month earnings is expensive.