ABB India rallies to record highs as UBS raises stock's price target

UBS said ABB is the best bet on the 'low-to-medium voltage electrification' theme despite near-term concerns over short-cycle order fatigue.

"We think there is plenty of scope for ABB to scale up its new order growth across motion (mobility-led positioning) and low/medium-voltage electrification product expansion, which augurs well for margins even from current levels," said the brokerage's analysts Amit Mahawar and Akshay Gattani in a client note.

ABB shares have jumped 88% in the past year as against the 39% advance in the benchmark BSE 200 index.

UBS said the stock outperformance reflects a better-than-expected pick-up in new orders, on a par with its peers, such as and CG Power.

"The market seems to be pricing in better domestic growth, while not fully appreciating the optimal Ebitda (earnings before interest, tax, depreciation and amortisation) margin levels ABB could achieve with its ongoing strategies, revenue mix and growth delta from the substantial, untapped low/medium-voltage market," the analysts said.

UBS said ABB's premium share valuations (similar to that of consumer companies) are justified on account of the company's superior returns structure. "Consistent consensus earnings upgrades have driven a strong upmove in the stock price and we believe earnings upgrades are far from over," they said.