ABB India (ABB IN) – Q3FY25 Result Update – Margin drag persists amid QCO & competition – Accumulate

We cut our EPS estimates for CY26/CY27E by -5.2%/-2.6% and factoring in QCO related higher raw material imports pressurizing margins and loss of ABB’s pricing power amid heightened competition. ABB India (ABB) reported 13.7% YoY revenue growth, while EBITDA margin contracted by 344bps YoY to 15.1%. Large order bookings continued to face delays amid prolonged decision-making cycles, while Chinese competition remained intense primarily across Electrification and Motion segments. Margins were further impacted by higher imported raw material costs due to QCO compliance, with normalization expected over the next 3–4 quarters. The company continues to witness traction from data centers, electronics, and rising investments in process industries. However, the post-Covid pricing advantage has nearly eroded, intensifying competitive pressures on profitability. Following the global parent’s divestment of the Robotics business, ABB India is evaluating strategic options for its domestic assets, with a decision expected in the next 2–3 quarters, though a separate listing appears unlikely. In the near term, ABB faces headwinds from delays in large orders, QCO-related raw material challenges and heightened competition. Despite these challenges, ABB stands to benefit in the long run given: 1) rising demand for energy-efficient and premium-quality products, 2) a resilient business model, 3) focused growth in high-potential segments such as data centers, rail & metro, renewables, and electronics, and 4) a strong domestic order pipeline. The stock currently trades at a P/E of 56.9x/48.9x on CY26/27E. We roll forward to Sep’27E and maintain our ‘Accumulate’ rating valuing the stock at a PE of 56x Sep’27E (60x CY26E earlier) arriving at a revised TP of Rs5,540 (Rs5600 earlier).