Siemens India stock gets 'Neutral' rating

Written by fe Bureau | Updated: Jan 31 2011, 18:30pm hrs
Siemens Indias parent Siemens AG reported India order inflows of euro 1.21 billion, up 160% year-on-year (44% quarter-on-quarter) in the December quarter. India revenues grew 25% YoY excluding currency translation, (38% YoY in euro terms) to euro 550 million. The company disclosures mentioned turnkey order wins for combined cycle power plants in India. These appear to be fresh orders, as 1.6GW Torrent group CCPP orders were reported in July 2010.

Over the past four quarters, Siemens India revenues have averaged 78% (range of 70%-83%) of the India top line reported by the parent company. Assuming the historical average is maintained in December quarter, the implied revenue of Rs 25.7 billion (up 37% YoY) is tracking well ahead of the consensus estimate of Rs 22.6 billion (implying 21% YoY growth). Similarly, historical order inflows reported by Siemens India have been about 50-70% of total India inflow in a quarter. Assuming the lower end of the range holds, Siemens India inflows could stand at about Rs 36 billion (20% ahead of our estimate of Rs 30 billion for Dec-quarter). We expect Siemens Indias stock to react positively to healthy signs from the parent Dec-q results.

All regions delivered order inflow growth in Q1 (September year-end), led by Asia & Australia (+41% YoY excluding currency translation) and Americas (+11%). Inflow growth in the remaining geographies (Europe, CIS, Africa, ME) was 6%.

Miscellaneous takeaways from parent results: (1) Energy: (i) the focus in fossil power is in gas/combined cycle; (ii) margin pressure was high in the Transmission segment, particularly in China. Although pricing pressure in the orders was said to be easing, sourcing costs are up; (iii) within Wind, Siemens AG continues to see pricing pressure in onshore and a decent market in offshore; (2) Industry: Siemens AG management said that underlying margins in Industry are at peak levels; (3) Healthcare: the segment continued to see strong growth in emerging markets but was impacted in Europe by government austerity measures.

JP Morgan