Siemens Rating: Buy-A stable performance in the quarter by the firm

Company posted a strong comeback in FY21; growth visibility is healthy; ‘Buy’ retained with TP raised to Rs 2,660 from Rs 2,360

With wider private sector participation and improving new order outlook, SIEM’s earning trajectory should get better in line with peers such as ABB. Retain ‘Buy’.
With wider private sector participation and improving new order outlook, SIEM’s earning trajectory should get better in line with peers such as ABB. Retain ‘Buy’.

Siemens (SIEM) posted a stable set of P&L with execution and order intake for Q4 largely at pre-Covid levels. Revenues are in line, but Ebitda missed consensus with adverse input cost/overhead impact.

For FY21, SIEM posted a strong comeback with revenue/Ebitda largely at FY19 levels; however, order intake grew at high single digit. SIEM translated a far superior OCF to PAT at 125% (versus 90% in FY20) for the year. Management commentary on private capex and infra remains optimistic for coming quarters. With wider private sector participation and improving new order outlook, SIEM’s earning trajectory should get better in line with peers such as ABB. Retain ‘Buy’.

Exits FY21 on a stable P&L and better orders; growth visibility higher
While Q4 for SIEM is largely in line on order intake and execution, it had some impact of increased cost from higher RM and overheads. For FY21, however, revenues across segments barring mobility scaled up materially (y-o-y), with short-cycle (digital industries) doing better versus FY19 levels on revenue/Ebit levels. Strong intake in Q3 had led to a healthy pick-up in new orders for the year, reflecting a pick-up in both infra/private sector orders—also visible at L&T, Thermax, ABB, etc. Despite significant cost pressure, SIEM managed to revive margins across Energy, Digital & smart infra (versus FY20), while digital margins scaled up to newer highs.

Way forward for SIEM
SIEM’s leadership team has mastered the art of managing OPM volatility while keeping balance sheet quality at fore, both of which reflect in its annual results. New order inflow commentary is in sync with peers like ABB, Thermax on private sector and L&T etc on the infra outlook. As SIEM enjoys a better capex cycle going ahead, what remains key is how it plays and manages the competitive dynamics across segments. Also, scale-up in C&S where it invested a major portion of its cash beyond domestic market remains key. We expect overall pace of new orders and revenues to stay healthy going ahead with better Ebitda growth.

Outlook: Healthy growth visibility
SIEM’s addressable market opportunity has been expanding led by improving private capex spending and larger manufacturing footprint. Unlike peers, SIEM is a play on both public infra, private capex revival with additional upside from new segments. Retain ‘BUY/SO’ with a TP of Rs 2,660 (earlier Rs 2,360) on a rollover to Mar-23E.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express Telegram Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.