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Execution ramping up; strong order inflows

Our view

Siemens Ltd (SIEM) reported a good set of quarterly performance, led by execution pickup across segments. However, on account of input cost pressure and rise in other expense, margins remained under pressure. On the back of recovery in economic activity and uptick in private capex cycle,the company reported strong quarterly order inflows of Rs53bn (up 65% YoY) spread across verticals. As on 1QSY22 order book stands all‐time high at ~Rs156bn (1.1x TTM revenue), providing revenue visibility for next few quarters.  In the domestic market good traction is witnessed in sectors such as FMCG, Pharma, Chemicals, Cement, Mining and Marine, demand for newer technologies in infra (transportation, water, energy etc.) which could be key growth drivers going ahead, in our view.  

We remain positive on SIEM from a long‐term perspective given its 1) strong and diversified presence across industries, 2) focused digitization, 3) product localization, 4) solid balance sheet and 5) high cash flow. We have introduced our SY22 Revenue/PAT estimate at Rs153bn/Rs12.4bn respectively on the back of healthy tender pipeline. We roll over to SY24 estimate and maintain Accumulate rating on the stock with a revised TP of Rs2,537 (earlier TP of Rs2,334). The stock is currently trading at 69.2x/56.3x/47.6x SY22E/23E/24E earnings

Result Highlights

Sales came in at ~Rs32.4bn (up 12% YoY) primarily led by Digitalization (up 25% YoY) and smart Infra (up 8% YoY). While Gas & power/ Mobility/Portfolio of companies were down 31%/7%/46% YoY

Gross margin came in at 50% Vs 51% in 1QSY22 owing to input cost pressures

EBITDA decline by 8% YoY to Rs3.3bn with EBITDA margins stable at 10.2% v/s 12.4% in 1QSY21 due to higher other expenses (18% growth) and employee expense (9% up)

PBT de‐grew by 6.6% YoY at Rs3.3bn. Finance cost continue to remain low at Rs54mn.

Adj. PAT came in at Rs2.5bn down 6.4% YoY owing to subdued operating performance.

Order inflow grew by 65% YoY to Rs53bn which is highest ever in last 8 quarters. During 3Q, the company has bagged Rs9bn orders for the electrical and mechanical system works for Pune Metro Rail Line 3 corridor.

Order Book stands at Rs156bn, up 22% YoY

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