Buy Siemens Ltd for the Target Rs 4,600 by Emkay Global Financial Services Ltd
We assume coverage on Siemens (SIEMENS) with BUY and TP of Rs4,600, valuing it at 65x its Jun-28E EPS. Siemens’s operational performance was below expectations. Consolidated revenue at Rs47.1bn (up 14.8% yoy) was above consensus’ estimates, supported by healthy execution across key segments like Smart Infrastructure (up 11% yoy), Mobility (up 13% yoy), and Digital Industries (up 25% yoy). Siemens’s order inflow stood at Rs63.3bn (up 16.5% yoy) while order backlog was healthy at Rs466.7bn (up 9.6% yoy), providing visibility of 2.5x its TTM revenue. During the quarter, SIEMENS completed sale of its LVM business for cash consideration, resulting in one-time provisional gain of Rs21bn. Marco-economic tailwinds such as significant capex announced in infrastructure development, signing of an EU-India FTA deal, and healthy capex outlined in the railway segment are all expected to drive healthy demand.
Cost pressure dents operating profit
Revenue for the quarter stood at Rs47.1bn (+14.8% yoy), supported by healthy execution across key segments like Smart Infrastructure (Rs26.3bn; +11% yoy), Digital Industries (Rs11.4bn; +25% YoY), and Mobility (Rs9.3bn; +13% YoY). Gross margin stood at 28.9% (-170bps YoY) while higher operating expenses resulted in 350bps yoy decline in EBITDA margin to 9.1%. EBITDA was down 17% yoy at Rs4.3bn. Commodity cost volatility, increase in material costs, and forex losses impacted operating margins. PAT fell 19% yoy to Rs3.4, below consensus’ estimate of Rs3.9bn.
Strong momentum across Infrastructure, Mobility, and Automation
Smart Infrastructure continued to deliver robust growth, supported by strong activity across grid modernization projects, data centers, and commercial real estate. The Mobility business also recorded healthy growth during the quarter, led by the Rolling Stock business. Digital Industries (predominantly import-driven) secured orders for automation solutions for solar cell manufacturing as well as across metals, electronics, pharmaceuticals, and water segments.
Order book strong at Rs466.7bn; healthy order inflow of Rs63.3 bn
For the quarter, Siemens’s order inflow stood at Rs63.3bn (+16.5% yoy). SIEMENS bagged a large order for signaling and train control technologies for the MumbaiAhmedabad High-Speed Rail corridor in the previous corresponding quarter. Excluding that, order inflow grew 43.9% yoy. Order backlog stands healthy at Rs466.7bn (+9.6% yoy), providing 2.5x TTM revenue visibility.
Investment summary
We assume coverage on Siemens (SIEMENS) with BUY and target price of Rs4,600, valuing it at 65x its Jun-28E EPS.
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