On Friday, UBS downgraded ABB (ST:ABB) India stock from Buy to Neutral, despite increasing the price target to INR 9,100 from INR 8,830. The revision reflects the firm's perspective that although ABB India has experienced significant earnings upgrades and strong market returns over the past year, the current valuation may limit further upside potential.
ABB India has seen its earnings forecasts raised by 40% by consensus over the past 12 months, with UBS's own estimates up by 50%. The stock has delivered a 97% return in that period, compared to 113% and 95% for peers Siemens India and CG Power, respectively.
The company has benefited from strong structural and cyclical drivers across both conventional sectors and emerging segments such as new mobility, data centers, renewables, and segments driven by the Production Linked Incentive (PLI) scheme.
Despite these positive factors, UBS suggests that the stock's current valuation, at 75 times its estimated earnings for 2026, is already high. This valuation is one standard deviation above ABB India's historical average and seems to anticipate an earnings growth rate of over 30% compounded. Given these figures, UBS believes that the likelihood of further valuation expansion is limited.
The upgraded price target of INR 9,100, up from INR 8,830, implies that UBS acknowledges the company's growth potential and strong market position. However, the change to a Neutral rating indicates a more cautious outlook on the stock's investment potential at its current price point.
Investors in ABB India will be monitoring the company's performance closely, particularly in the high-growth areas highlighted by UBS, to see if the company can continue to deliver strong results and possibly justify its premium valuation.
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