Siemens Ltd. share price target

Siemens India, a flagship company of Siemens AG (Germany), is an integrated technology provider and a leading powerhouse in electronics and electrical engineering. Siemens is strongly placed in Energy and Infrastructure including transmission & distribution, automation, urban...

Revenue grew by 10% YoY after better execution across segments led by rise in labour availability and strong OB execution. Siemens Ltd (SIEM) reported good set of numbers across all segments led by better execution and pickup in economic activity. Better execution was led by rise in labour availability, strong execution of OB and sharp pickup in economic activity. Further cost control measures helped to improve margins during the quarter. OI grew 9% YoY to Rs32bn primarily driven by short cycle...

SIEM's 1QFY21 revenue growth of 15% YoY suggests a gradual recovery, in line with the trend across peers. EBITDA grew 13% as EBIDTA margin declined 30bp YoY. Adjusted for strong cut in other expenses (5.6% of sales v/s 9.6% in 1QFY20), the margin trend seems to be under pressure and needs monitoring over next 1-2 quarters. Other income declined 33% YoY to INR570m, despite nearly 10% YoY increase in the cash balance, suggesting the impact of declining interest rate on excess cash on the Balance Sheet. Smart infrastructure and Digital Industries witnessed a strong rebound....

Currently utilization is at 75% plus level with an uptick in order inflows up 8.7% YoY. Sectors like Pharma, F&B;, T&D;, etc. remain optimistic. Siemens Ltd (SIEM) reported healthy set of numbers despite of challenging environment. During 4Q, better revenue was driven by higher share of services business, strong execution of OB and rising labour availability. Further better gross margins and cost control measures helped improve margins during the quarter. OI came in at Rs32bn, up 8.7% YoY led by...

Siemens India, a flagship company of Siemens AG (Germany), is an integrated technology provider and a leading powerhouse in electronics and electrical engineering. Siemens is strongly placed in Energy and Infrastructure including transmission & distribution, automation, urban...

During 3QSY20, the company incurred Rs2.3bn of additional cost related to Covid-19 which resulted to an operating loss. Siemens Ltd (SIEM) reported weak set of numbers primarily led by deferment in offtake by customers, slowdown in short-cycle business and weak demand environment from large infrastructure projects. As per our estimates, order inflows came in at ~Rs19bn (down 37% YoY) on account of delay in ordering activity as orders deferred due to various reason such as re-negotiation of...

deferment in offtake by customers, slowdown in short-cycle business and weak demand environment from large infrastructure projects. As per our estimates, order inflows decline by 20% YoY to ~Rs30bn, thereby leading to 4% YOY decline in order backlog to ~Rs125bn. Management indicated that capex spending will continue to remain weak in the near term due to overall slowdown in the economic activities and various countries facing restriction on anticipation of long-term economic consequences. Further, we believe that the numerous stimulus packages announced by various countries would...

Recommendations and stock picks: Outlook on ordering both domestic/international ex roads is likely to be weak. Banks lending will be selective. We have downgraded ABB from ADD to SELL and Siemens from ADD to REDUCE. We have cut PSP/ITD rating from BUY to ADD. We maintain BUY ratings on other coverage stocks. For our coverage universe, we have recalibrated the P/E multiple/EPS estimates lower resulting in TP cuts by 10-60%. In cap goods, LT is our top pick. In the mid cap EPC space, KNR, PNC, HG Infra and Ahluwalia are our top picks. COVID-19 poses multiple headwinds: Industrials companies have been hit hard by COVID-19 pandemic. Execution has started to pick up slowly post almost a month of lockdown. Local Govt approvals are coming slowly as the sector grapples for remobilization of sites. Urban areas are being turned into containment fortresses and it will take time for the works to resume. This will largely impact Metro and Real Estate projects execution. National Highway projects are still executable as they run through interior State districts with limited COVID-19 impact. We believe pure play NH EPC players are best placed to tide through the crisis. Buildings players are worst impacted.

SIEM has well-diversified product offerings across power, infrastructure and industry verticals and the impact of economic slowdown is more profound compared to say ABB, which is now a pure play products & services company. Over FY14-19, the continued business segmental EBIT CAGR stood at 21% v/s revenue growth of 9%. Over FY19-22, we forecast continued business segmental EBIT CAGR at 15% v/s revenue CAGR of 9%. We attribute margin expansion to (a) better sales mix, (b) rising share of services and (c) operating leverage in industrial automation segment of the business. There is scope of margin expansion in mobility segment as well given benign competition as the established player CG Power is struggling. economic slowdown impacting top-line growth, the company did well on working capital management. Adjusted for L&A; to related parties, the working capital cycle stood at 47 days in FY19 v/s 59 days in FY18.