Buy Siemens Ltd For Target Rs.2550 - ICICI Direct
Decent performance, margins impacted…
About the stock: Siemens Ltd (Siemens) is a leader in technology solutions for smart, intelligent, building technologies, mobility, digital industries and power T&D.
* It operates mainly in five key segments including energy/gas & power (40%), smart infrastructure (27%), digital industries (19%), mobility (9%)
* Well placed to gain from the overall energy market transformation from electrification to automation & digitisation
Q1FY22 Results: Siemens reported decent Q3FY21* results amid disruptions
* Consolidated revenue at | 2934.2 crore, up by 140% YoY amid low base
* EBITDA came in at | 246 crore with margins of 8.4% impacted by higher other expense, employee expenses, higher commodity prices
* Consequently, PAT came in at | 138.9 crore (vs. | 12.8 crore in Q3FY21)
* Order inflows for Q3FY21 came in strong at ~| 4584 crore, up 160% YoY
What should investors do?
Overall, further penetration of automation & digitisation products and services across segments to drive long term growth.
* We remain long term positive and retain our BUY rating on the stock.
Target Price and Valuation: We value Siemens at | 2550 on SoTP basis
Key triggers for future price performance:
* Strong focus on technology leadership in digitisation and automation products to further strengthen its market share
* Strong demand for short cycle products with clear traction form steel, cement, chemical, pharma, fertiliser industries to drive strong growth and margin expansion in smart infrastructure and digital industries segments
* Expect revenue, EBITDA to grow at CAGR of ~14.2%, 19.4%, respectively, in FY21-23E due to strong traction in short cycle products and services
Alternate Stock Idea: We also like Bharat Electronics in our coverage.
* Strong order inflows visibility, strategy to diversify into non-defence/civil areas, focus on increasing exports and services to drive long term growth.
* BUY with target price of | 205
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