Siemens Results Report - Robust performance - HDFC Securities

Mr. Parikshit D Kandpal, CFA, HDFC Securities

Siemens India Ltd (SIL) delivered revenue/EBITDA/APAT beat of 6%/17/12.5% as recovery panned out faster than expected, post the economic unlocking. EBIT margin improved for Energy, Smart Infra, and Mobility segments. SIL highlighted that it is seeing strong traction in the Digital Industries vertical and the pandemic may have well advanced the digital adoption by 1-2 years. C&S integration is on track and SIL intends to take it to the exports market. Whilst we acknowledge that the government is committed to drive infrastructure creation and private Capex would gradually recover as capacity utilisation improves, the recent run-up and punchy valuation limit any further scope for rerating. We roll forward our valuation (35x) to June-23E and arrive at a TP of INR 1,811 (vs. INR 1,662 on Mar-23E). We maintain REDUCE on Siemens. We have upgraded FY22/23E EPS on account of improving growth outlook by 1.5/6.4% respectively.

2QFY21 highlights: Revenue: INR 33.5bn (+19%/+16% YoY/QoQ, 6% beat); Strong growth in Gas & Power (16% YoY), Smart Infra (35% YoY) and Digital Industries (50% YoY) led to revenue outperformance. EBITDA: INR 4.4bn (+89%/+22% YoY/QoQ, beat of 17%). EBITDA margin: 13.2% (+487/+71bps YoY/QoQ) vs. est of 11.9%. Margin beat was driven by lower- than-expected employee costs and other expenses. Sequential margin expansion was led by improvement in EBIT margin of Energy (15.1% vs. 12.6%), Smart Infra (9.1% vs. 7.5%) and Mobility (10.1% vs. 9%). Consequently, APAT from continued business came in at INR 3.2bn (+92%/+20% YoY/QoQ, 12.5% beat).

Robust inflows and backlog; strong cash position: SIL has a strong order backlog of INR 127bn, with new orders from continuing operation during 2QFY21 at INR 33.1bn. Cash & Bank balances stood at INR 44.3bn vs. INR 55.5bn at Sep 20-end. SIL generated positive cash flow of INR 7.3bn during 1HFY21.

Short cycle ordering robust, long cycle to pick up in medium term: SIL highlighted that short order, brown field, opex-related Capex continues while long cycle ordering is impacted due to state/Central government's focus on completing existing projects and deferrals on account of COVID-19. The tendering is expected to pick up as the lockdown eases.

Shares of SIEMENS LTD. was last trading in BSE at Rs.2090 as compared to the previous close of Rs. 2059.2. The total number of shares traded during the day was 16123 in over 1316 trades.

The stock hit an intraday high of Rs. 2104.2 and intraday low of 2069.25. The net turnover during the day was Rs. 33650091.

Source : Equity Bulls

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