Among India’s industrial names, few command the kind of valuation that ABB India does. The stock trades at nearly 60 times trailing earnings, and has delivered an annual return of nearly 41% in the last five years. Over the last three years, ABB India’s net profit has more than doubled, its balance sheet carries zero debt and over Rs 5,000 crore in cash, and its order backlog crossed Rs 10,000 crore for the first time in mid-2025, giving nearly two years of revenue visibility. Revenues grew 7 percent in the first half of the calendar year despite a slowdown in large project inflows. Still, the recent numbers suggest that growth has entered a steadier phase. Margins have narrowed from last year’s highs, order intake declined 4 percent year-on-year, and the company’s management calls 2025 “a year of moderation.” Demand from sectors such as metals, data centres, and heavy industry has softened, and compliance costs linked to new quality norms have lifted input expenses. For investors, this sets up a familiar dilemma: is ABB India’s valuation a reflection of enduring quality and long-term positioning in electrification and automation, or is it running ahead of fundamentals in a market that has already priced in much of the future? Business momentum and order visibility In Q2 CY2025, ABB India’s revenue rose 12 percent year-on-year to Rs 3,175 crore, marking the company’s highest second-quarter turnover in five years. But order inflows told a softer story. Total orders slipped 12 percent to Rs 3,036 crore, as large project wins were absent this time. The base order book is smaller, but recurring contracts that reflect steady market demand still grew about 5 percent, showing that the underlying business remains firm even without one-off mega orders. At the same time, ABB’s order backlog touched an all-time high of Rs 10,064 crore, up 6 percent from last year, offering roughly two years of execution visibility. The backlog mix is balanced between large, multi-year projects and regular base orders across sectors such as electrification, motion systems, and automation. Company leaders described the quarter as “resilient” but noted that the broader market is readjusting after a prolonged period of expansion. Segment-wise, the electrification division, which supplies power distribution and smart-building solutions, recorded steady growth from commercial infrastructure and renewables, offsetting weaker demand from heavy industry. Motion, the largest business segment, maintained momentum in motors, drives, and rail traction, though large mobility orders that had boosted last year’s base were missing this time. Process Automation saw a dip as investment decisions in mining and energy were delayed, while Robotics and Discrete Automation continued to expand its presence in automotive and electronics manufacturing, with revenue up sharply even as orders moderated. Overall, ABB’s operations reflect a maturing cycle from booking new orders to executing the large backlog built over the past two years. Management expects the second half of 2025 to remain stable, driven more by execution discipline than new order surges. In other words, the company’s strength now lies less in fresh order inflow and more in its ability to convert its Rs 10,000 crore backlog into timely revenue and cash. Margins and cost pressures After a strong run, ABB India’s profits took a breather this quarter. Net profit for Q2 CY2025 came in at Rs 352 crore, down 20 percent from a year ago, as margins slipped to 11.1 percent from 15.7 percent. A mix of cost spikes and one-off hits pulled the numbers lower. Material costs jumped to 61.8 percent of revenue, mainly because the company had to import more parts than usual. The new Quality Control Order (QCO) rules meant ABB could only use certified components. To stay on schedule, it had to import at higher prices. The rupee’s weakness against the euro and Swiss franc made things tougher, and a Rs 39.5 crore project correction in the Electrification business added to the drag. ABB still holds over Rs 5,000 crore in cash, even after paying out a hefty dividend earlier this year. It has stocked up on inventory to keep projects moving smoothly. Most of these cost pressures look temporary, a mix of regulation, currency swings, and timing. As local sourcing improves and new pricing flows through, margins should stabilise. The question is how quickly that happens, because at 60x earnings, the market is already betting that the bounce-back will come soon. Electrification transition and demand trends As the country moves towards cleaner energy, smarter factories, and more automated infrastructure, ABB sits right at the centre of it all. Its products, including motors, drives, building systems, and robots, power the backbone of this shift. In Q2 CY2025, demand from data centres, renewable projects, and commercial buildings stayed strong. Orders from heavy industries were slower, but the pipeline remains healthy. The Motion business held up well with steady traction in transport and manufacturing, while Process Automation faced some delays as clients took longer to close deals. Robotics, though still small, continues to grow as more Indian factories turn to automation. Government spending on power and infrastructure is providing a cushion against the private sector’s cautious pace. ABB’s move to make more components locally is also helping it control costs and reduce exposure to currency swings. Exports are slowly picking up, too, and the company has already cut most of its emissions since 2019, a small but important part of its appeal to industrial clients focused on sustainability. So even if order growth has slowed, the foundation looks strong. The question is timing when this steady demand starts showing up as faster growth on the books. Valuation: What’s priced in, what’s not ABB India is debt-free, sitting on more than Rs 5,000 crore in cash. Even in a softer market, revenues grew 7 percent in the first half of 2025, and cash flows remain healthy. But the price already bakes in a lot of optimism. Order inflows fell 4 percent in the first half of the year, and management itself calls 2025 “a year of moderation.” Margins are under pressure, large projects are taking longer to close, and competition is intense. Investors are, in effect, paying today for the profits they expect to see a year or two from now. If growth and margins recover as expected, ABB’s premium may hold. If not, the stock could feel stretched at these levels. The business remains high quality. The open question is whether it deserves to keep trading like a tech company, or whether it slowly settles back into being valued like an industrial one. Note: This article relies on data from annual and industry reports. We have used our assumptions for forecasting. Parth Parikh has over a decade of experience in finance and research and currently heads the growth and content vertical at Finsire. He holds an FRM Charter and an MBA in Finance from Narsee Monjee Institute of Management Studies. Disclosure: The writer and his dependents do not hold the stocks discussed in this article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.
