Valuation downgrades may keep ABB under pressure

THE COMPASS DEVANGSHU DATTA

- 

ABB had steady execution through Q2FY26, but order inflows remained weak and margins were under pressure.

Analysts are cutting revenue and earnings estimates and further disappointments could lead to valuation downgrades.

A 570 basis points year-on-year (Yo-Y) decline in the Q2 gross margin was higher than the 340 basis points decline of operating profit margin to around 15.1 per cent. The net profit margin at 12.4 percent is also hovering at the lower end of the 12-15 per cent range in which ABB historically operates.

The motion and electrification segments registered 9-10 per cent growth on the back of good execution, while process automation revenues were flat Yo-Y with customers deferring spends. ABB is fighting intensifying competition, and it may have an unfavourable mix of products and there is lingering impact from the QCO (Quality Control Order) directive and more forex-related volatility.