Siemens India beats Street but may not sustain growth

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Mumbai | Updated: November 24, 2018 5:57:50 AM

Siemens India posted an earnings beat for the third straight quarter as it also reported its best quarterly performance in the last six years on the back of strong revenue growth across all business segments.

The company’s new orders increased 38% to Rs 3,720 crore. (Reuters)

Siemens India posted an earnings beat for the third straight quarter as it also reported its best quarterly performance in the last six years on the back of strong revenue growth across all business segments.

Its fourth quarter revenue jumped 25.4% year-on-year (y-o-y) to Rs 3,939 crore although this was aided by incentives of Rs 67 crore under the Merchandise Export from India Scheme. In particular, its building technologies, power and gas, and mobility business lines led the growth in revenue.

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However, net profit dropped 55% y-o-y to Rs 279.20 crore owing to an exceptional gain of Rs 567 crore the previous year from selling a land parcel in south Mumbai. Adjusted for the gain, profit was up 39%. Earnings before interest, tax, depreciation and amortisation (Ebitda) rose 32% y-o-y to Rs 418.60 crore while operating margins expanded 50 basis points y-o-y, to 10.6%.

The company’s new orders increased 38% to Rs 3,720 crore. Sunil Mathur, MD & CEO, Siemens India, believes this provides good growth visibility in the ongoing financial year, supported by order inflow in the the base business that continues to grow, and strong profitability and cash from operations. He expects a pick up in private sector capital expenditure which would further drive orders.

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However, analysts said that high revenue growth may not be sustainable given the weak near-term order outlook in view of the upcoming general elections and the company’s overall depleted order book of Rs 12,352 crore. Notwithstanding the surge in the latest quarter, the y-o-y growth in the order book shows a flat trajectory. Analysts also noted that while the company’s exposure to transportation and other sunrise sectors like digitalisation and automation drove its premium valuations in the past, the regular sale of strong and growing businesses like healthcare, mobility, and mechanical drives has created an uncertainty.

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