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Healthy uptick in margin, execution, and order inflows

Siemens’ 2QFY27 results came ahead of our estimates, driven by better-than-expected execution and margin performance. Within segments, the smart infrastructure division has benefited from strong inflows and price hikes taken over the last 1-2 quarters. Order inflow growth also stood healthy at 38% YoY with inflows of INR62b, taking the order book to INR470b. We tweak our estimates by 5%/2%/4% to bake in the 2Q performance and will revisit our numbers again after the analyst meet. We reiterate our Neutral rating with a revised TP of INR3,700 (vs. INR3,600) based on 45x Dec’28E earnings.

Result above our estimates

Revenue 2QFY27 grew 17% YoY to INR57b, 9% above our estimate. Gross margin contracted 260bp YoY to 27.3%, below our estimate of 29.0%. While gross margin was lower than our expectation, lower-than-expected employee costs and other expenses as a percentage of sales led to an EBITDA margin beat. Absolute EBITDA increased 3% YoY to INR6.3b (vs. our est. of INR5b), while EBITDA margin contracted 150bp YoY to 10.9%, above our estimate of 9.4%. Adj. PAT increased 4% YoY to INR5b, vs. our est. of INR4b. For 1HFY27, revenue increased 16% YoY on a like-to-like basis to INR104b, while EBITDA/PAT declined 6% YoY each to INR11b/INR9b, and margin contracted 240bp YoY to 10.1%. For 1HFY27, OCF jumped 3.5x to INR13.1b, supported by healthy working capital management, while FCF stood at INR10.3b (vs. INR20m last year).

We revise our est. to bake in better performance in smart infrastructure

Performance of the Smart infrastructure segment was ahead of our expectations. Strong demand momentum from power utilities, renewables, and data centers has benefited this segment. Company has taken price hikes in this segment and we believe this has helped in improving EBIT margin sequentially. Mobility division would have benefited from strong order book and a ramp up in locomotive deliveries. Digital industries segment margin have stabilized around 5% for 1HFY27. We revise our estimates for Smart infrastructure and also fine tune estimates for other segments

Financial outlook and valuation

We revise our estimates by 5%/2%/4% for FY27/28/29 to bake in 2Q performance and expect a revenue/EBITDA/PAT CAGR of 17%/22%/23% over 12MFY26-12MFY29. The stock is currently trading at 69.3x/51.7x/42.1x on FY27/FY28/FY29E EPS. We reiterate our Neutral rating with a revised TP of INR3,700 (vs. INR3,600) based on 45x Dec’28E earnings.

Key risks and concerns

1) a slowdown in order inflows from key government-focused segments

2) aggression in bids to procure large-sized projects would adversely impact margins

3) related-party transactions with parent group entities at lower-thanmarket valuations would weigh on the stock performance.

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