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Siemens reported revenue and PAT ahead of estimates on the back of strong
growth across verticals, including power transmission, distribution, and oil
& gas. It reported decent increase in order book, adjusted for mega order
impact last year. Increased focus from the parent towards utilising Indian
operations as a low-cost manufacturing hub could lead to strong earnings
momentum for the Indian subsidiary.
Energy revenue drives top-line
Siemens reported a strong set of numbers, with revenues growing ahead of our
and consensus estimates, at 36% Y-o-Y, largely led by power transmission,
distribution and oil & gas verticals. While projects execution was strong, Siemens
also witnessed healthy demand in the domestic market in the products business.
Improved revenue growth visibility; order book at INR 151 bn
Siemens reported INR 40 bn of new orders during the quarter (up 50% Y-o-Y
adjusted for Qatar order last year, which on reported basis was down 23% Y-o-
Y). Thus, the outstanding order book provides strong visibility at INR 151 bn, up
9% Y-o-Y (1.2x FY11E revenues).
Core EBIDTA and PAT growth robust
Driven by strong revenues, Siemens reported decent 31% Y-o-Y growth in core
PAT (adj. for INR 760 mn one-time profits last year). Also, on an adjusted basis,
EBIDTA grew 26% Y-o-Y, with adjusted margins at 14.3% (down 90bps Y-o-Y).
Outlook and valuations: Strong growth ahead; upgrade to ‘BUY’
While Siemens has seen strong traction in new orders in the past 3-4 quarters,
particularly in the energy segment, its industry vertical has also been growing
decently. We believe Siemens is poised for a strong earnings growth trajectory
given parent’s increased focus on emerging markets like India. We expect the
company to report EPS CAGR at 22.5% (FY10-12E) on the back of strong
revenue growth visibility and healthy traction from the industry segment. The
company plans to incur INR 16 bn capex in the next 3-4 years in various
industry verticals, including renewable, which we believe, augurs well for the
long term. We upgrade Siemens to ‘BUY’ from HOLD, and rate it as ‘Sector
Outperformer’.
Company Description
SIEM is a 55% subsidiary of Siemens AG, Germany, which has presence in more than
190 countries. The company offers diverse products and services solutions in power
generation, transmission and distribution, automation & drives, industrial solution, and
healthcare. It has a nation-wide sales and service network, 17 manufacturing plants and
strong network of channel partners.
Investment Theme
SIEM is one of the most diversified engineering stocks in India with presence across all
major verticals, like power T&D, generation solutions, Railways, Drive solutions etc. The
company derives a majority of its business for Indian Plants from Middle East market
largely in the power equipment and projects space. We expect SIEM to be a major
beneficiary of power and industrial capex in Indian and Middle East market, and see
further growth avenues in the Railway sector for the company with increased focus of
the government in improving Railway infrastructure, particularly hi-end locomotives.
Key Risks
Significant change in the revenue mix of standalone operations in favour of high-margin
businesses could boost operating margins and, hence, the bottomline.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Siemens reported revenue and PAT ahead of estimates on the back of strong
growth across verticals, including power transmission, distribution, and oil
& gas. It reported decent increase in order book, adjusted for mega order
impact last year. Increased focus from the parent towards utilising Indian
operations as a low-cost manufacturing hub could lead to strong earnings
momentum for the Indian subsidiary.
Energy revenue drives top-line
Siemens reported a strong set of numbers, with revenues growing ahead of our
and consensus estimates, at 36% Y-o-Y, largely led by power transmission,
distribution and oil & gas verticals. While projects execution was strong, Siemens
also witnessed healthy demand in the domestic market in the products business.
Improved revenue growth visibility; order book at INR 151 bn
Siemens reported INR 40 bn of new orders during the quarter (up 50% Y-o-Y
adjusted for Qatar order last year, which on reported basis was down 23% Y-o-
Y). Thus, the outstanding order book provides strong visibility at INR 151 bn, up
9% Y-o-Y (1.2x FY11E revenues).
Core EBIDTA and PAT growth robust
Driven by strong revenues, Siemens reported decent 31% Y-o-Y growth in core
PAT (adj. for INR 760 mn one-time profits last year). Also, on an adjusted basis,
EBIDTA grew 26% Y-o-Y, with adjusted margins at 14.3% (down 90bps Y-o-Y).
Outlook and valuations: Strong growth ahead; upgrade to ‘BUY’
While Siemens has seen strong traction in new orders in the past 3-4 quarters,
particularly in the energy segment, its industry vertical has also been growing
decently. We believe Siemens is poised for a strong earnings growth trajectory
given parent’s increased focus on emerging markets like India. We expect the
company to report EPS CAGR at 22.5% (FY10-12E) on the back of strong
revenue growth visibility and healthy traction from the industry segment. The
company plans to incur INR 16 bn capex in the next 3-4 years in various
industry verticals, including renewable, which we believe, augurs well for the
long term. We upgrade Siemens to ‘BUY’ from HOLD, and rate it as ‘Sector
Outperformer’.
Company Description
SIEM is a 55% subsidiary of Siemens AG, Germany, which has presence in more than
190 countries. The company offers diverse products and services solutions in power
generation, transmission and distribution, automation & drives, industrial solution, and
healthcare. It has a nation-wide sales and service network, 17 manufacturing plants and
strong network of channel partners.
Investment Theme
SIEM is one of the most diversified engineering stocks in India with presence across all
major verticals, like power T&D, generation solutions, Railways, Drive solutions etc. The
company derives a majority of its business for Indian Plants from Middle East market
largely in the power equipment and projects space. We expect SIEM to be a major
beneficiary of power and industrial capex in Indian and Middle East market, and see
further growth avenues in the Railway sector for the company with increased focus of
the government in improving Railway infrastructure, particularly hi-end locomotives.
Key Risks
Significant change in the revenue mix of standalone operations in favour of high-margin
businesses could boost operating margins and, hence, the bottomline.
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