Motilal Oswal neutral on Siemens; target Rs 792

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Motilal Oswal neutral on Siemens; target Rs 792

Motilal Oswal has maintained neutral rating on Siemens with a revised target price of Rs 792 in its report dated November 23, 2011.

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Motilal Oswal has maintained neutral rating on Siemens with a revised target price of Rs 792 in its report dated November 23, 2011.

"Siemens India (SIEM) posted 4QFY11 revenue of INR36.5b (up 21% YoY), marginally below our estimate of INR37b (up 23% YoY), driven by impressive growth in all three segments. EBITDA margin declined 515bp YoY to 8% (against our estimate of 12%). PAT was down 33% YoY at INR1.7b (against our estimate of INR3b, up 20% YoY). Profitability was significantly impacted by a forex loss of INR1.59b in 4QFY11. Adjusting for this, PAT grew by 15% YoY. Order momentum remained sluggish in 4QFY11, falling 10% YoY. FY11 order intake was INR123b, flat YoY. The order book stands at INR139b, up 2% YoY, with BTB ratio of 1.2x TTM revenue."

"The company's Energy segment revenue grew 18% YoY in 4QFY11 (38% for FY11), despite a 4% YoY decline in sales in the transmission segment. Overall EBIT margin was down 655bp YoY at 7.1% in 4QFY11. Profitability was pulled down by a sharp decline in the transmission segment margin (3.2% v/s 15.2% YoY). We believe profitability of this segment was impacted by project-specific cost bookings and forex losses."

"SIEM's balance sheet was healthy as at the end of FY11. Net working capital increased to 29 days from five days for September 10 due to a significant decrease in current liabilities (down from 233 days at September 2010 to 194 days now). Inventory and debtors declined marginally compared with September 2010."

"We are cutting FY12 and FY13 earnings estimates by 12% each, to incorporate lower order-intake growth. SIEM trades at 22x FY12E and 18x FY13E earnings. While SIEM remains among the best plays on capex and outsourcing, a sluggish outlook on order-intake growth will limit the upside. Maintain Neutral with a revised target price of Rs 792 (earlier INR900), based on 25x FY12E EPS, says Motilal Oswal research report.

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To read the full report click on the attachment