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Performance – a mixed bag

Siemens (SIEM) delivered a revenue beat, while profitability came in slightly below our estimate. Segment-wise, smart infra and mobility did well in terms of revenue, while the digital industry remained weak on both revenue and margin fronts. This resulted in a lower-than-estimated overall EBITDA margin. Order inflows grew 10% YoY and stood at INR48b for the quarter. The company has changed the financial year to the Apr-Mar period. However, on a like-for-like comparison basis, its order inflow growth stood at 20% YoY for the trailing 12-month period, while the trailing 12M PAT has declined YoY even after adjusting for higher other income last year on property sales. Due to weakerthan-expected margins, we cut our future margin assumptions and roll forward our TP to INR3,350, premised on 45x P/E Dec’27 estimates. We reiterate our Neutral rating on the stock as we await a broad-based scale-up in inflows and execution. Our estimates already bake in margin improvements across segments

Beat on revenue, but a slight miss on PAT

SIEM delivered a revenue beat, while profitability came in slightly below our estimate. Revenue grew 16% YoY to INR51.7b, which was above our estimate of INR48b. The YoY growth was led by strong growth across Smart Infra and Mobility segments, while the Digital Industries segment was broadly flat, though it has improved sequentially. Absolute EBITDA at INR6.2b increased 13% YoY, in line with our estimate. However, EBITDA margin contracted 30bp YoY to 11.9% vs. our estimate of 13.4%. Margin was lower than our estimate, mainly due to higherthan-expected employee cost and other expenses. PAT declined 7% YoY to INR5b, a slight 6% miss vs. our estimate due to a one-time gain of INR690m from the sale of property in the same period last year. Order inflow was up 10% YoY to INR48b, leading to a 6% increase in the order book to INR423b. For the period of 12MSep’25, on a like-for-like basis, revenue grew 8% YoY, while EBITDA dipped 5% YoY, and adj. PAT declined 3% YoY (adj. PAT for 12M-Sep’24 stood at ~INR17b after adjusting the INR2.9b gain from the sale of property).

Segmental performance led by smart infrastructure and mobility business

The smart infrastructure and mobility segment continues to be the key growth driver for Siemens. Smart infrastructure revenue grew 20% YoY to INR27b, while EBIT margin contracted 30bp YoY to 13.1%. Mobility revenue grew 29% YoY to INR11b, with margins improving 290bp YoY to 11.1%. This was above our estimate of 9.8%. The digital industries segment was broadly flat at INR11b, though it has improved sequentially. However, the volumes were hit by a lower reach in the order backlog from the previous year and muted private sector Capex. The EBIT margin of Digital Industries remained weak and contracted 240bp YoY to 7%. The LVM segment was up 5% YoY at INR3b, with an EBIT margin of 1.8% during the quarter.

Government capex remains supportive, private capex still lags

The company expects the government’s continued emphasis on infrastructure and the recent improvement in capex execution to remain supportive for demand. Better discipline in railway investments and rising power requirements driven by AI and data center expansion, along with plans to double national generation and transmission capacity over the next few years, should translate into steady opportunities across grid upgrades, distribution improvements, and smart energy systems. The private sector capex remains subdued, although SIEM may still benefit gradually as manufacturing becomes more complex in areas such as electronics, semiconductors, batteries, data centers, and pharma, where automation and digital solutions are becoming more relevant. Smart infrastructure and EV charging are expanding at a measured pace, and easing semiconductor supply pressures are helping stabilize order momentum in the digital industries segment. The company is also integrating AI into its operations and product offerings to enhance efficiency and support future demand, although the overall pace of adoption will likely be gradual.

Financial outlook

We cut our estimates by 2%/3%/1% in 18MFY26E/12MFY27E/12MFY28E to factor in weaker than expected margins in 4Q18MFY26. We expect revenue/EBITDA/PAT to grow at a CAGR of 11%/14%/9% over FY24 (Sep-ending)-FY28 (Mar-ending). Overall, we expect the smart infrastructure segment to maintain its growth trajectory, and we expect a gradual improvement in digital industries and mobility. The EBIT margins of both these divisions are lower than Smart Infrastructure's margins.

Valuation and view

The stock is currently trading at 47.7x/40.2x P/E on FY27/28E earnings. We reiterate our Neutral rating on the stock with a revised TP of INR3,350, based on 45x Dec’27E earnings.

Key risks and concerns

Key risks: 1) slowdown in order inflows from key government-focused segments, 2) aggression in bids to procure large-sized projects would adversely impact margins, and 3) related-party transactions with parent group entities at lower-than-market valuations to weigh on the stock performance.

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