IGI Logo

Execution moderates; biz remains structurally positive

Siemens witnessed moderation in execution with standalone revenue growing 11.7% YoY to Rs43bn against our expectations of Rs46bn for Q4FY22. Except mobility, all the segments reported execution below estimates. While gross margin expanded by ~200bps YoY to 32.7%, increase in ‘other expenses’ (+46.4% YoY – could be due to one-offs) impacted the EBITDA margin, down 25bps YoY to 10.8%. Hence EBITDA came in at Rs4.7bn (I-Sec: Rs5.2bn), up 11% YoY. ‘Other income’ increased by 114% YoY on account of robust cash balance (Rs57bn at FY22-end). PAT thus came in ~23% YoY higher at Rs3.9bn (I-Sec: Rs3.6bn). Greater demand for automation and digitisation augurs well for the company’s strong digital offerings. We have marginally tweaked our estimates and maintain our ADD rating on the stock due to its consistent performance and favourable outlook on incremental capex. Revise our SoTP-based target price to Rs3,011 (earlier: 3,097).

* Execution moderates: In Q4FY22, total income witnessed 11.7% YoY growth to Rs43bn. This was led by mobility / digital industries / smart infrastructure / energy segments, which grew 41% / 20% / 10% / 4% YoY respectively. We expect execution to pick pace in the coming quarters with easing of supply-chain challenges and softening commodity prices. We expect a total revenue CAGR of 16% over FY22- FY24E, with mobility and digital industries propelling the strong growth.

* EBITDA margin below estimates: Gross margin expanded ~200bps YoY to 32.7%; however, EBIDTA margin fell 25bps YoY to 10.8% during the quarter (FY22: 10.8%). This was mainly due to 46.4% YoY increase in ‘other expenses’, which could be attributable to forex-related MTM losses. Segment-wise, energy / mobility margins shrank by 370bps / 440 bps YoY to 9.5%/4.8%. Digital industries / smart infra witnessed margin expansion of 510bps / 210bps to 11.8% / 9.3%, respectively.

* Order intake sustains: Order inflow rose 25% YoY to ~Rs40bn, led by a clear upswing in both public and private capex. The record ~Rs171.8bn orderbook offers sound revenue assurance. We are optimistic on private capex coupled with investment by the Central government on infrastructure backed by higher capital outlay in the FY23 Union Budget. Demand for digital offerings continues to be upbeat with greater adoption of automation and digitisation by industries.

* Maintain ADD: The governments impetus on infrastructure spend continues to translate into strong capital expenditure in the country, followed by investments in smart and green infrastructure, electrification, decarbonisation technologies, automation and digitisation. We believe the company is in a strong position to leverage these growth opportunities given its capabilities across the verticals. Besides the various PLI schemes, ESG related capex announced for multiple industries lend a fillip to private capex.

To Read Complete Report & Disclaimer Click Here

For More ICICI Securities Disclaimer https://www.icicisecurities.com/AboutUs.aspx?About=7

Above views are of the author and not of the website kindly read disclaimer