Reduce Siemens Ltd For Target Rs.3,554 - Yes Securities
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Another strong quarter; positives priced in
Our view
Siemens Ltd (SIEM) reported a healthy quarter led by broad-based revenue growth and ~200bps YoY expansion in EBITDA margin. A double digit revenue growth in both Smart Infra and DI, was accompanied by a sustained meteoric growth in Mobility (+48% YoY, +47% YTD) segment. While order inflow growth (+5% YoY) moderated on a high base, ordering pipeline remains robust driven by its strong positioning in mobility, infrastructure and energy businesses.
Looking forward
The company’s exposure to high growth segments, its high market share in higher technology segments such as HVDC, EMUs, grid automation are expected to provide strong tailwinds across the company’s business segment. The company is expected to be a beneficiary of both, (1) a strong investment cycle in infrastructure and energy coupled with (2) structural tailwinds pertaining to increasing technology penetration. Mobility segment is expected to occupy a larger share of the revenue pie given strong order win ratio in both traditional rail and metro orders in the near past. We expect margin to stabilize around the 13% levels over the next two years and remain positive on SIEM from a long-term perspective while we believe the current price largely factors in the above-mentioned growth prospects. We roll forward to SY25E and maintain our REDUCE rating with a revised TP of Rs3,554 (50x FY25E EPS) as we see limited scope of rerating from these multiples.
Result Highlights
* Sales came in at Rs48.7bn (up 14% YoY) led by Digitalization (up 13% YoY), Mobility (up 48% YoY), Smart Infra (up 14% YoY) and Gas & Power (up 4% YoY)
* With softening RM inflation, gross margin came in at 51.9% Vs 49.1% in 3QSY22
* EBITDA grew by 37% YoY to Rs5.7bn with a ~190bps YoY expansion at 11.6%
* PBT grew by 49% YoY at Rs6.1bn led by 68% YoY growth in other income at Rs1.3bn
* PAT came in at Rs4.6bn, up 51% YoY
* Order inflow grew by 5% YoY to Rs52.3bn
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