SIEMENS - Strong numbers; Perception improves: Edelweiss

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􀂃 Standalone Q4FY10 core PAT growth strong at 54% Y-o-Y
Siemens reported a strong set of Q4FY10 numbers, with revenue and PAT
growth of 22% and 54% Y-o-Y (adjusted for other incomes), respectively. The
jump was primarily driven by strong contribution from the power transmission
division (contributing 43% to total EBIT versus 2% last year same quarter).


􀂃 New orders for FY10 jumped 41% Y-o-Y; strong revenue visibility
The company reported a closing order book of INR 136 bn (+32% YoY) for
September 2010, implying an order inflow growth of 41% for FY10 and about
30% Y-o-Y for Q4FY10. Siemens bagged certain large value energy orders
during the year, which provides strong revenue growth visibility with a book to
bill of 1.5x on FY10 basis.

􀂃 Power transmission boosted FY10 performance
The power transmission division posted strong performance in Q4FY10 with
100% Y-o-Y revenue growth, while EBIT grew more than 30x to INR 1.58 bn. For
FY10, while the division contributed about 44% to the standalone EBIT,
transmission EBIT catapulted 30% Y-o-Y on back of strong execution and
healthy margins in certain large value export orders.

􀂃 Outlook and valuations: Sustaining growth; maintain ‘HOLD’
Siemens has witnessed strong growth in new orders over the past three-four
quarters, which is visible in its healthy order book of INR 138 bn, which imparts
a strong revenue growth visibility. The company is expected to see an improving
traction given a strong pipeline of T&D orders in the domestic market. Also,
improvement in the overall industrial activity in the past couple of quarters has
augured well for the company, which we expect to continue. We remain
optimistic about Siemens’ overall long-term business growth and expect it to bid
for certain large value tenders in the domestic market in non power avenues in
the near term, like railways, which could surprise the market on the upside and
a possible re-rating of the stock from the current level. However, we maintain
our ‘HOLD/Sector Performer’ recommendation/rating at current valuations of
28x PE on FY11E basis, which does not leave a material upside from current
levels, and would wait for further clarity from management on certain large
value tenders due for award in the coming months.