Buy Siemens; target of Rs 7800: Motilal Oswal

Motilal Oswal's research report on Siemens

SIEM’s 2QFY24 result was ahead of our estimates, aided by a strong margin performance and higher other income leading to a sharp beat on PAT. The company reported revenue/PAT growth of 18%/70% YoY in 2QFY24. Margin outperformance was driven by an improved revenue mix, pricing gains and productivity measures taken by the company. SIEM aims to maintain margins at higher levels amid a strong demand scenario, along with productivity measures. Order inflows stood at INR51.8b, down 13% QoQ, due to delays in finalization. However, the enquiry pipeline remains strong. SIEM continues to benefit from a strong demand environment, especially in transmission, data center, EV, railways, semiconductor, electronics and hydrogen. It has planned a capex of INR5b for GIS and metros to capitalize on domestic and export demand. SIEM has also approved the demerger of its energy segment into a separate entity, which will be listed by CY25-end.

Outlook

We raise our estimates for FY24/FY25/FY26 by 17%/18%/26% primarily to factor in higher margin. We reiterate our BUY rating with a revised TP of INR7,800 (from INR6,050), based on 65x Sep’26E EPS.