Detailed Narrative
Robust Financial Performance in CY24
ABB India reported a strong financial performance for the full year CY24, with revenue expanding by 17% year-on-year, building on a 22% growth in the previous year. Profit Before Tax (PBT) grew by 51%, and Profit After Tax (PAT) expanded by 50%. The company achieved a full-year Operational EBITDA margin of 20% and a PAT margin of 15.4%, with Return on Capital reaching 26.5%. The cash balance also saw a 14% increase, reaching ₹5,390 crores.
Order Book and Backlog Dynamics
The company's order backlog grew by 12% to ₹9,400 crores by the end of CY24, providing significant revenue visibility for the coming years. Management expects 65-70% of this backlog to be executed in CY25, with the remaining 30-35% in CY26. While Q4 CY24 total orders were down 14% year-on-year, this was primarily attributed to a large ₹600 crore order from the mobility sector in Q4 CY23 not repeating. However, base orders in Q4 CY24 increased by 4% to ₹2,654 crores, maintaining a steady momentum.
Strategic Focus on Localization and Emerging Segments
ABB India continues to prioritize localization of its global technologies and expansion into Tier-2 and Tier-3 cities. Emerging segments are key growth drivers, with data centers identified as a 'very powerful segment' contributing significantly to the company's books in CY24. Warehousing technology is also expected to boom in the next two to three years. The company's focus on premiumization has also contributed to improved gross margins.
Sustainability and CSR Initiatives
The company has made significant strides in sustainability, converting three of its six plants to 'zero waste to landfill' units. It has also achieved an 86% reduction in GHG emissions since 2019 and enrolled 40% of its suppliers in ESG awareness and assessment programs. ABB India actively engages in Corporate Social Responsibility (CSR) through infrastructure projects, skill development programs, and medical support in rural communities.
Segmental Performance and Outlook
The Electrification division showed strong traction in renewables, buildings, and power distribution. The Motion division experienced flat orders in Q4 CY24 due to delays in private CAPEX investor decisions but anticipates recovery. Robotics, identified as the fastest-growing division, maintained a profitability of 14% on average, driven by demand from electronics and automotive sectors. Process Automation saw steady revenue and order volumes, with profitability inching towards better margins, despite some competitive pressures from Chinese players in specific sub-segments.
Capital Allocation and Shareholder Returns
The Board approved a final dividend that is 51% higher year-on-year, reflecting the company's commitment to shareholder returns. The cash balance of ₹5,390 crores is planned for utilization in organic expansion, including investments in working capital to support growth. The company is also actively evaluating inorganic opportunities that align with its strategic objectives and create value for customers and businesses.
Margin Outlook and Competitive Landscape
Management guided for a sustainable PAT margin corridor of 12-15% for the coming years. This outlook considers the current high profitability driven by operational efficiencies and favorable commodity prices, with an expectation that easing market conditions and price adjustments will lead to a normalization of margins. While some competition from Chinese players was noted in specific Process Automation projects, management expressed confidence in its localization strategy and value-added offerings to mitigate broader competitive risks.