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Decent Q4, margin recovery will be key focus

Quick Pointers:

* Order inflow increased by 10.0% YoY to Rs48bn with healthy order book standing at Rs422.5bn.

* Digital Industries EBIT margin contracted by 234bps YoY to 7.0% with, while Mobility’s margins expanded from 8.2% to 11.1%

We revise our SY26/SY27E EPS estimates by -3.8%/-1.8% factoring in slower execution pace in Digital Industries and LVM, which is affecting the overall margin profile. Siemens (SIEM) reported a decent quarter with revenue up 16% YoY to Rs51.7bn, while EBITDA margin contracted 15bps YoY to 12.3% due to higher other expenses, with a decline in other income (-26.6% YoY) further dragging profitability. The quarter was driven by strong execution in Smart Infrastructure (+20% YoY) and the Mobility business (+28.6% YoY), whereas Digital Industries remained soft, weighed down by a lower carry-forward order backlog and muted private capex. Low Voltage Motors continued to face headwinds from demand normalization further impacting segment performance. Nevertheless, Order book remains healthy at Rs422.5bn with order inflow of Rs48bn, supported by strong traction across electrification, T&D, utilities, semiconductors, data centers, and sustained investments in rail and metro infrastructure. The stock is currently trading at 53.3x/45.3x on SY26/27E. We roll forward to Sep’27E and maintain our ‘Accumulate’ rating with a revised TP of Rs3,470 (vs. Rs3,431 earlier), valuing the stock at 51x Sep’27E (53x Mar’27E earlier).

Despite short term cautious stance on private/ industrial capex, we believe SIEM to sustain long-term growth given 1) continued traction in public capex in areas like T&D, Metro, railways, utilities etc. 2) its strong and diversified presence across industries through focus on electrification, digitalization & automation, 3) product localization, 4) strong balance sheet, and 5) valueunlocking from demerger for Energy business.

Weaker operating performance led to contraction in margins: Consolidated revenue grew by 16.0% YoY to Rs51.7bn (Ple: Rs52.2bn) driven by broad-based growth across segments. EBITDA increased by 14.6% YoY to Rs6.4bn (Ple: Rs6.7bn) with EBITDA margin contracted by 15bps YoY to 12.3% (Ple: 12.8%) due to contraction in gross margin and increase in other expenses (+18.7% YoY to Rs4.4bn). PBT (exc. Extra Ordinaries) increased by 6.4% YoY to Rs6.8bn largely dragged by lower other income by -26.6% YoY to Rs1.2bn (despite adj. of Rs688 mn for base quarter). Adj. PAT increased by 4.3% YoY to Rs5.0bn (Ple: Rs5.5bn & consensus: Rs5.1bn) further dragged by higher effective tax rate of 26.8% (+146bps YoY)

EBIT margin expanded in Mobility segment: Revenue grew by ~16% to Rs51.7n Smart Infra/Mobility/Digital Industries/LVM contributing 55%/20%/20%/5%. The EBIT% declined across segment except for Mobility (+294 bps YoY), while LVM’s EBIT margin declined sharply by 404bps YoY to 1.8%.

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