Maintain REDUCE on Siemens - Largely in-line quarter, margins beat - HDFC Securities

Mr. Parikshit D Kandpal, Institutional Research Analyst, HDFC Securities

SIL delivered Revenue/EBIDTA/APAT beat of 1.5%/6.2/1.6%, the result came in largely on expected lines. Margins across all segments, except Energy and Portfolio companies, saw YoY dip. 2QFY21E will give an even better visibility on normalised margins going ahead as some impact of COVID-19 may still be reflecting upon overall execution and profitability. SIL had earlier indicated good margins in order backlog backed by corrective cost optimization measures and some of it sustaining. Whilst we acknowledge Govt intent to drive infrastructure creation and gradual recovery in private capex on back of improving capacity utilization, recent run up and punchy valuation limit further re-rating. We roll forward our valuation (35x) to Mar-23E and arrive at TP of Rs 1,662 vs Rs 1,489 Dec-22E. We maintain REDUCE on Siemens India Ltd. (SIL). We have upgraded FY21/22/23E EPS on account of improved execution by 5/6.8/6.8% respectively.

1QFY21 Highlights: Revenue: Rs 29bn (+8.7%/-17.6% YoY/QoQ, 1.5% beat). EBITDA: Rs 3.6bn (+7.3%/-22% YoY/QoQ, beat of 6.2%). EBIDTA margin: 12.4% (-16/-42bps YoY/QoQ) vs est of Rs 11.9%. Profit from operations of mechanical drives business (sold to Flender in Jan-21) for the quarter stood at Rs 278mn. Consequently, APAT: Rs 2.6bn (-0.2%/-21% YoY/QoQ, 1.6% beat). Order inflow stood at Rs 32.1bn (+4.2% YoY, driven by DI and MO) and order backlog at Rs 128bn (+3% YoY). SIL highlighted slowdown in the energy transmission business due to delay in TBCB projects awards.

Segmental performance: Gas & Power (34% revenue contribution): Revenue at Rs 10.2bn (+14/-36% YoY/QoQ) and margins at 12.6% (+160/+42 bps YoY/QoQ). Smart infrastructure (30%): revenue at Rs 8.8bn (+16%/-4% YoY/QoQ) and margins at 7.5% (-230/-306bps YoY/QoQ). Mobility (6%): revenue at Rs 1.9bn (-11%/-38% YoY/QoQ) and margins at 9% (-230/-474bps YoY/QoQ). Digital Industries (26%): revenue at Rs 7.7bn (+28/+22% YoY/QoQ) and margins at 10.4% (-8/+253bps YoY/QoQ). Portfolio of companies(3%): revenue at Rs 936mn (-7/-27% YoY/QoQ) and margins at 5.3% (+265/-320bps YoY/QoQ). Quarterly outperformance was driven by Gas & Power and Digitial Industries.

Shares of SIEMENS LTD. was last trading in BSE at Rs.1874.9 as compared to the previous close of Rs. 1846.75. The total number of shares traded during the day was 31174 in over 2680 trades.

The stock hit an intraday high of Rs. 1892.95 and intraday low of 1826. The net turnover during the day was Rs. 57967743.

Source : Equity Bulls

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