Accumulate Siemens; target of Rs 5902: Prabhudas Lilladher
Prabhudas Lilladher's research report on Siemens
We revise our SY25/26 eps estimates by -10.8%/-11.4% factoring in continued demand normalization in Digital Industries. Siemens (SIEM), including energy business, reported modest revenue growth of 4.0% YoY, while its PBT margin expanded by 230 basis points to 16.4% YoY. During the quarter, the company reclassified its Energy business as discontinued operations. Excluding the Energy business, the company’s overall performance was underwhelming, driven by a slowdown in short-cycle private sector capital expenditures. Additionally, its Digital Industries segment continued to face headwinds from demand normalization. Capital expenditures announced in recent Union Budget is expected to support the growth in India’s commercial real estate along with grid stability and energy efficiency benefitting Siemen’ Smart Infra segment. Meanwhile, substantial investments in the country’s rail infrastructure—such as metros and signaling—are expected to drive improvements in Siemens' Mobility segment.
Outlook
Despite short term cautious stance on private/ industrial capex, we believe SIEM to sustain long-term growth given 1) continued traction in public capex in areas like T&D, Metro, railways, utilities etc 2) its strong and diversified presence across industries through focus on electrification, digitalization & automation, 3) product localization, 4) strong balance sheet, and 5) valueunlocking from demerger for Energy business. The stock is currently trading at a PE of 67.1x/55.5x on SY25/26E. We maintain ‘Accumulate’ rating with a revised TP of Rs5,092 (Rs7,716 earlier), valuing the stock at a PE of 63x Sep26E (73x Sep-26E earlier) due to slowdown in private capex hampering the order intake visibility.
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