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Overtly expensive. Results were mixed with (1) weak revenues (down 6% yoy), (2) steady order inflows (flat yoy) and (3) improving margin (in line at 8.4%). It is well placed to capture the recovery in the capex cycle (business interests aligned with the PM’s growth vision, higher localization-led improvement in competitive positioning). The valuations ask rate is too high (EPS need to increase 5X over the next three years to cover 14% cost of equity for an exit at a fair 25X multiple). We roll forward our TP to `620 from `600 on 25X December 2016 EPS
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
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1QFY15: Adjusted sales decline 6% yoy; gross margin increase supports 8% EBITDA margin Adjusting for prior-period items (write back of healthcare business sales on accounting-policyled change), Siemens reported a 6% yoy decline in revenues (11% lower than estimate). This was driven by weak execution across segments and exacerbated by a sharp decline in the metals business (recently sold). EBITDA margin at 8.4% (largely in line) was led by a sharp 250bps decline in raw material cost, which more than compensated for negative operating leverage. Very high other income (up 300% yoy) offset weakness in execution, leading to an in line adjusted PAT of `1.1 bn (up 34%yoy). Reported PAT was `6.4 bn (exceptional gain of ~`7bn from the sale of its metals and technologies business). Refines segmental reporting into further verticals; broad-based weakness in execution Siemens has started reporting financials based on new segments (nine, including metals). Execution was weak across segments, especially energy (down 6% yoy), process industries (down 9% yoy), and metals and technologies (down 20% yoy). Most segments reported a steady 4-8% EBIT margin; however, power and gas was 11%, process industries 2%, and metals and technologies -7%. Marginal increase in order inflow; backlog flat yoy and offers limited visibility 1QFY15 order inflows were `20.9 bn, up 4% yoy. The implied order backlog of `131 bn was flat yoy and offers a limited one-year revenue visibility. Siemens said its order inflows are dependent on the private sector (industry, energy) and the government’s willingness to start capex spending (infrastructure). While lower interest rates and improving confidence can support such an economic revival, it is yet to reflect in on-the-ground activity. Revise near-term estimates; valuation ask rate (on September 2017 EPS) is too high We revise our FY2015/16/17 EPS estimates to `17.2/23.2/28.7 from `17.8/24.3/29.9 to account for the change in revenue recognition for healthcare and some growth moderation in FY2015 execution. We roll forward our TP to `620 from `600 on 25X December 2016 EPS.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily02022015ka.pdf
Overtly expensive. Results were mixed with (1) weak revenues (down 6% yoy), (2) steady order inflows (flat yoy) and (3) improving margin (in line at 8.4%). It is well placed to capture the recovery in the capex cycle (business interests aligned with the PM’s growth vision, higher localization-led improvement in competitive positioning). The valuations ask rate is too high (EPS need to increase 5X over the next three years to cover 14% cost of equity for an exit at a fair 25X multiple). We roll forward our TP to `620 from `600 on 25X December 2016 EPS
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
1QFY15: Adjusted sales decline 6% yoy; gross margin increase supports 8% EBITDA margin Adjusting for prior-period items (write back of healthcare business sales on accounting-policyled change), Siemens reported a 6% yoy decline in revenues (11% lower than estimate). This was driven by weak execution across segments and exacerbated by a sharp decline in the metals business (recently sold). EBITDA margin at 8.4% (largely in line) was led by a sharp 250bps decline in raw material cost, which more than compensated for negative operating leverage. Very high other income (up 300% yoy) offset weakness in execution, leading to an in line adjusted PAT of `1.1 bn (up 34%yoy). Reported PAT was `6.4 bn (exceptional gain of ~`7bn from the sale of its metals and technologies business). Refines segmental reporting into further verticals; broad-based weakness in execution Siemens has started reporting financials based on new segments (nine, including metals). Execution was weak across segments, especially energy (down 6% yoy), process industries (down 9% yoy), and metals and technologies (down 20% yoy). Most segments reported a steady 4-8% EBIT margin; however, power and gas was 11%, process industries 2%, and metals and technologies -7%. Marginal increase in order inflow; backlog flat yoy and offers limited visibility 1QFY15 order inflows were `20.9 bn, up 4% yoy. The implied order backlog of `131 bn was flat yoy and offers a limited one-year revenue visibility. Siemens said its order inflows are dependent on the private sector (industry, energy) and the government’s willingness to start capex spending (infrastructure). While lower interest rates and improving confidence can support such an economic revival, it is yet to reflect in on-the-ground activity. Revise near-term estimates; valuation ask rate (on September 2017 EPS) is too high We revise our FY2015/16/17 EPS estimates to `17.2/23.2/28.7 from `17.8/24.3/29.9 to account for the change in revenue recognition for healthcare and some growth moderation in FY2015 execution. We roll forward our TP to `620 from `600 on 25X December 2016 EPS.
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily02022015ka.pdf
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