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Healthy execution and inflows amid input pressure

We have revised our EPS estimates by -6.6%/-4.5% for FY28E/FY29E, factoring in persistent commodity inflation and forex volatility weighing on margins. Siemens (SIEM) reported a mixed quarter, with revenue growing 17.0% YoY to INR 57.3bn, while EBITDA margin contracted 193bps YoY to 10.9%, impacted by adverse forex movements and elevated commodity prices. Smart Infrastructure (SI) delivered robust revenue growth of 20.4% YoY, supported by demand across power T&D capex, grid modernisation, data centre investments and commercial infrastructure. Digital Industries (DI) grew 8.0% YoY, driven by demand for Industry 4.0, factory automation, smart manufacturing and software-led digitalisation across automotive, pharma, chemicals, metals and cement. Mobility reported healthy revenue growth of 13.8% YoY, supported by demand across railway electrification and modernisation, high-speed mobility and rail automation. However, margins across all three segments remained under pressure from elevated material costs, commodity volatility and adverse forex movements, with Mobility (-364bps YoY) and Digital Industries (-200bps YoY) witnessing sharper contractions. Order inflows remained strong at INR 62bn (+37.8% YoY), taking the order book to INR 470.3bn and providing healthy revenue visibility. While demand remains buoyant across public and private sectors, supported by sustained capex momentum, margin recovery remains a key monitorable amid persistent input-cost and currency pressures. The stock is currently trading at 50.7x/42.7x on the earnings of FY28/29E. We roll forward to Sep’28E and upgrade our rating from ‘Hold’ to “Accumulate” given overall correction in stock despite recent recovery; valuing the stock at a PE of 50x Sep’28E (51x Mar’28E) arriving at a TP of INR 3,850 (INR 3,831 earlier).

While we remain cautious in the near term due to supply chain disruptions and elevated input costs amid the ongoing Middle East conflict, we continue to remain constructive in long-term growth prospects driven by

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

5) value unlocking from demerger for Energy business and Low Voltage Motors business.

Higher input costs impact profitability despite healthy execution:

Consolidated revenue grew by 17.0% YoY to INR 57.3bn (Ple: INR 55.8bn). Gross margins contracted by 262bps YoY to 27.3% (Ple: 29.1%) likely due to adverse movement of raw material. EBITDA remained flat at INR 6.3bn (Ple: INR 5.8bn) with EBITDA margin contracting by 193bps YoY to 10.9% (Ple:10.4%) primarily due to higher input cost and unfavourable exchange rate movement. Adj. PBT increased by 2.8%YoY at INR 6.8bn (Ple: INR 6.4bn) due to higher other income (+25.2% YoY to Rs1.5bn) offset by sharp rise in interest cost (+200% YoY to INR 126mn) and increase in depreciation (+30% YoY to INR 894mn). Adj. PAT increased by 1.7% YoY to INR 5.0bn (PLe: INR 4.8bn). Order inflow increased by 37.8% YoY to INR 62.3bn while order book stood at INR 470.3bn (inc. locomotives) increased by 11.3% YoY.

Higher material costs impacted margins:

Robust revenue growth in Smart Infra (+20.4% YoY to INR 11.4bn) and healthy growth in Mobility (+13.8% YoY to INR 12.9bn) and Digital Industries (+8.0% YoY to INR 11.5bn). EBIT Margins declined across all segments: Smart Infra (-130bps YoY to 11.7%), Mobility (-364bps YoY to 7.5%) and Digital Industries (-200bps YoY to 5.0%).

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