PL Stock Report: Siemens (SIEM IN) - Q4SY23 Result Update – Healthy Q4; planned Capex amid strong demand - Accumulate

Siemens (SIEM IN) - Amit Anwani - Research Analyst, Prabhudas Lilladher Pvt Ltd.

Rating: ACCUMULATE | CMP: Rs3,647 | TP: Rs4,241

Q4SY23 Result Update – Healthy Q4; planned Capex amid strong demand

Quick Pointers:

§ Relatively lower operating expenses aid EBITDA margin expansion of 100bps despite gross margin contraction.

§ Order inflow came in at Rs45bn (up 12.2% YoY).

Siemens (SIEM) reported healthy quarterly performance with consolidated revenue up ~24.7% YoY. EBITDA margin expanded 100bps YoY to 12.1%, owing to lower other expenses despite gross margin contraction. We believe that strong traction is likely to continue in high growth verticals such as data centers, railways, chemicals & pharma, e-mobility, waste heat recovery, smart infra, intralogistics, building automation, decarbonization, T&D etc. Siemens announced capex of ~Rs4.2bn toward capacity expansion of power transformers (from 15000MVA to 30000MVA by Dec2025 with capex worth Rs3.6bn) and Vacuum Interrupters (from 40000 VI tubes to 70000 VI tubes by H22026 with capex of Rs560mn) to meet the growing demand in India and globally. Current capacity utilization of power transformer/ vacuum interrupter stand at ~100%/95%, respectively owing to strong demand.

We remain positive on SIEM from a long-term perspective given 1) its strong and diversified presence across industries through focus on electrification, digitization & automation products, 2) product localization, 3) strong balance sheet, 4) healthy public & private capex and 5) focus on cost efficiencies. The stock is currently trading at PE of 61.1x/51.6x SY24/25E. We maintain Accumulate rating on stock with TP of Rs4,241 (same as earlier), valuing it at PE of 60x SY25E, factoring in strong outlook and focus on high growth areas such as digitalization, Automation & energy efficiency product offerings.

Strong growth witnessed across major segments: Consolidated revenue grew 24.7% YoY to Rs58.1bn (PLe ~Rs56.6bn and consensus estimate of Rs50.8bn), driven by growth across Smart Infra, Mobility, Digital Industries. On segmental front, Energy grew 13.2% YoY to Rs18.5bn, Smart Infrastructure grew 26.6% YoY to Rs21.1bn, Mobility grew 61.2% YoY to Rs7.1bn and Digital Industries grew 26% YoY to Rs11.9bn. EBITDA grew 35.7% YoY to Rs7.0bn, (PLe Rs7.6bn and consensus estimate of Rs6.5bn), with EBITDA margin expanding by 100bps YoY to 12.1% (Vs. PLe ~13.5%), mainly due to lower other expenses (declined by 8.6% YoY). despite lower gross margins (29.4% vs 32.9% in Q4FY22). PAT came in at ~Rs5.7bn up 49.8% YoY (PLe ~Rs5.4bn and consensus estimate of Rs5bn), aided by higher other income (up 41.5% YoY to Rs1.45bn).

Order inflows came in at Rs45bn: Order inflows for Q4SY23 grew 12.2% YoY to Rs45bn while on full year basis, order intake came in 209.2bn, up 6.5% on YoY. Order book (calculated) stands at ~Rs188bn (1.0x TTM revenue). SIEM continues to witness traction from railways, and public/private capex on infrastructure, steel, cement, data centers, intralogistics and e-vehicles which augurs well for SIEM’s long term business prospects.

(Click on the Link for Detailed Report)