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Margin weakness persists

Siemens’ 1QFY27 results were mixed, with in-line revenue and a miss on profitability due to lower margin. Margins across segments were impacted by commodity and currency fluctuations, especially in smart infrastructure, as a larger part of the order book is short cycle in nature. Adjusted with a one-off item in mobility segment, in all segments, EBIT margin stood in a single digit during the quarter. Order inflow increased by 16.5% to INR63.3b, taking the overall order book to INR467b, up 10% YoY. Order inflow growth was driven by automation orders across sectors, orders from grid modernization, data center, commercial real estate and rolling stock. We cut our estimates by 8%/2% for FY27/28 to bake in the impact of commodity and currency fluctuations in margin and expect 12MFY26-12MFY29 revenue/EBITDA/PAT CAGR of 16%/25%/27%. We retain Neutral rating on the stock with a revised TP of INR3,600 (vs. INR3,500 earlier), rolling forward to 45x Sep’28E earnings

In-line revenue, miss on profitability

Revenue grew 15% YoY to INR47b, which was broadly in line with our estimates, led by broad-based growth across segments. Gross margin came in at 28.9%, above our estimate of 28.0%. Absolute EBITDA declined 17% YoY to INR4.3b with margins at 9.1%, below our estimate of 10.0%, primarily due to higher-thanexpected other expenses. Due to weaker-than-expected margins in Smart Infra segment, adj. PAT came in below our estimate. Adj. PAT declined 17% YoY to INR3.5b vs. our est. of INR4.0b. The company received ~INR18b (adjusted with tax) from the sale of its LVM business, which was recorded as exceptional gains in the quarterly table. Order inflow increased by 16.5% to INR63.3b. The corresponding quarter of the previous year included a large order, excluding which, inflow growth was 43.9%. This led to a closing order book of INR467b as of Jun’26, up 10% YoY.

Segmental performance

Revenue across segments was broadly in line with our estimates, barring Digital Industry, which was 12% above our expectations. Smart Infra revenue increased 11% YoY to INR26.3b, Mobility revenue rose 13% YoY to INR9.3b, and Digital industry revenue grew 25% YoY to INR11.4b. At EBIT level, profitability was impacted by volatility in commodity prices, foreign exchange and an increase in material costs. Smart Infra EBIT margin contracted 580bp YoY to 7.6% (vs. our est. of 11.0%), Mobility EBIT margin expanded 640bp YoY to 10.2% (vs. our est. of 7.0%), while Digital Industries EBIT margin contracted 560bp YoY to 5.1% (vs. our est. of 3.0%). Mobility business benefited from a one-time gain of INR390m, excluding which its EBIT margin stood at 6.0%. Order inflows during the quarter increased 16.5% YoY (up 44% YoY adjusted for the large order win in the mobility division in the last year’s quarter. Digital Industries received orders for automation solutions for solar cell manufacturing and across metals, electronics, pharmaceuticals and water market segments. Smart infra segment witnesses growth across grid modernization projects, data centers and commercial real estate, while Mobility business witnessed healthy growth in the rolling stock business.

Outlook going forward across segments

Going forward, we expect Smart Infra segment to continue to benefit from the increased spending in key areas such as power T&D, grid automation, data centers, e-mobility, industrial infra, etc. We expect margins in this segment to recover once commodity headwinds ease out. In the Mobility division, locomotive deliveries have commenced and are expected to ramp up progressively, providing a meaningful growth driver going forward. Margins are also expected to remain protected despite commodity cost inflation, supported by the presence of price escalation clauses in the contracts. The Digital Industries segment inflows have started moving up and margins have improved sequentially. However, in this segment, we expect margins to remain subdued owing to limited localization and elevated input costs, particularly for semiconductors. With demand recovery from private sector, this segment can witness improvement in inflows and execution.

Financial outlook and valuation

We cut our estimates by 8%/2% for FY27/28 to bake in the impact of commodity and currency fluctuations in margin and expect 12MFY26-12MFY29 revenue/EBITDA/PAT CAGR of 16%/25%/27%. The stock is currently trading at 74.9x/56.5x/47.3x on FY27/FY28/FY29E EPS. We retain Neutral rating on the stock with a revised TP of INR3,600 (vs. INR3,500 earlier), rolling forward to 45x Sep’28E earnings

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