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Strong ordering across verticals, outlook positive; retaining a Buy

Its order-booking stint, which grew ~63% y/y in H1 FY22, continued, taking Siemens OB to a record ~Rs172bn (up 35.5% y/y). Optimism on the pace of its ordering is bright, led by investments (brownfield, greenfield) in various categories like data centres, railways, cement, steel, water, T&D, real estate, other industries. This is further supported by companies’ sustainability focus. Q2 FY22 revenue, though largely as expected, would have been better if not for supply-chain challenges mainly semiconductor shortages. Price hikes, cost controls and efficiencies have borne fruit with the Q2 FY22 12.3% EBITDA margin better than expected. We tweak our estimates based on H1 FY22 performance and the inflationary context. We maintain a Buy with a Rs2,752 TP (55x Mar’24 EPS).

Robust orders, bright outlook. Orders of Rs53.4bn were bagged in Q2 FY22, up 61.3% y/y, led by short-cycle orders and a large Pune metro-rail order. Order backlog of Rs172bn (1.2x TTM sales), provides robust revenue visibility. On bright outlook, we expect 17%/23% revenue/PAT CAGR over FY21-24 and EBITDA margin to improve from 11.1% in FY21 to 12.2% in FY24

Mobility, a key growth driver. Its mobility business is expected to thrive with orders for electric locomotives (movement toward more rolling stock) and for propulsion systems in Vande Bharat train orders. Also, electrification and signalling orders will continue to see traction in conventional railways, while substantial ordering is expected from metro-rail for metropolis & tier-2 and -3 cities.

Valuations. The present OB offers assurance of continued strong execution in coming quarters. Also, there can be a downside risk to the margin because of the inflationary context. Based on this and the H1 FY22 performance, we have tweaked our figures. We maintain our Buy rating with a TP of Rs2,752 (earlier Rs2,769). Risk: Less-than-expected-demand

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