ABB India’s Hidden Growth Engine: Why Near-Term Challenges Mask a Value Unlock Opportunity

The recent Q1 2025 earnings from ABB India have sparked skepticism due to a 19% year-on-year decline in Process Automation revenue, driven by delayed large project approvals. Yet, beneath this near-term miss lies a compelling narrative of order backlog resilience and strategic repositioning that positions the company to outperform in FY2025—and investors would be wise to look past the noise.

Order Backlog: A Beacon of Long-Term Demand

ABB’s global order backlog grew 5% YoY to $23.0 billion in Q1 2025, with Process Automation orders surging 23% to $2.0 billion. While ABB India’s struggles in this segment are undeniable, they are overshadowed by sector-specific tailwinds in railways and data centers. For instance, the railways segment in India is poised for a $15 billion infrastructure push by 2026, directly aligning with ABB’s expertise in electrification and automation. Meanwhile, the data center sector—despite a temporary pause from one hyperscaler—remains a growth driver, with ABB’s low-voltage electrification products now serving 75% of U.S. data centers via its $120 million U.S. manufacturing expansion.

The key takeaway? ABB India’s order backlog is not just resilient—it’s future-proofed. The global backlog’s 5% growth, coupled with a book-to-bill ratio of 1.16, signals robust demand. Even in India, stabilizing customer inventories and the government’s focus on energy transition (e.g., green hydrogen projects) suggest a rebound in large orders is imminent.

The Robotics Spin-Off: A Catalyst to Unlock Value

The planned spin-off of Robotics & Discrete Automation in 2026 is not merely a strategic move—it’s a value-unlocking catalyst that ABB’s stock has already priced in. Consider this: the stock rose 3.22% pre-announcement of the spin-off, reflecting investor confidence in ABB’s ability to refocus resources on its high-margin electrification and automation divisions.

By separating Robotics—a segment with cyclical demand—and merging its Machine Automation division into Process Automation, ABB will create a leaner, more focused entity. This reorganization will amplify synergies in hybrid industries like LNG and marine, where ABB’s integrated electrification + automation solutions are unmatched. The move also aligns with ABB’s “local-for-local” strategy, which already secures 75–80% of U.S. sales through domestic production, mitigating trade risks and ensuring supply chain resilience.

Why Buy Now? The Contrarian Case

Bearish sentiment on ABB India’s Q1 misses is understandable, but it ignores two critical factors:
1. Margin Resilience: ABB’s Operational EBITA margin held steady at 20.2%, boosted by a 170-basis-point gain from asset sales. Process Automation’s ROCE improved 250 basis points to 23%, signaling operational efficiency.
2. Execution Track Record: ABB has consistently delivered on its capital allocation priorities, including $120 million in U.S. manufacturing and a $2 billion+ backlog in Process Automation. The company’s 2025 outlook of mid-single-digit revenue growth and stable margins is grounded in this discipline.

Conclusion: ABB India’s Undervalued Play on Global Growth

ABB India’s near-term challenges are real but temporary. The Process Automation order surge, strategic reorganization, and spin-off catalyst combine to create a compelling value proposition. With a stock price already up 3.22% on spin-off news and a backlog that reflects sustained demand, investors who act now can capture the underappreciated upside in ABB’s transition to a leaner, electrification-focused industrial leader.

Actionable Takeaway: ABB’s stock offers a rare combination of near-term resilience and long-term catalysts. Positioning for the Robotics spin-off and order backlog execution makes it a buy at current levels.