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Siemens’ FY21 show is decent, though that may not be enough for the stock

For the September quarter, Siemens' revenue growth stood at 14 percent year-on-year while EBITDA declined by 5 percent.

November 26, 2021 / 10:06 AM IST
 
 
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Siemens Ltd’s share price fell by around 5 percent on November 25 on the National Stock Exchange (NSE), on a day when the Nifty 50 index inched higher by 0.70 percent.

Investors seem to be discouraged with the company’s September quarter results (Q4FY21) announced after market hours on Wednesday. The company’s financial year ends in September and, therefore, the September quarter is its fourth.

Last quarter, higher logistics and input costs were the main culprits, eating into Siemens’ profitability, even as revenue performance was satisfactory. On a standalone basis, raw material costs as a percentage of revenues rose 160 basis points (bps) year-on-year. One basis point is one-hundredth of a percentage point. Further, other expenses rose at a faster pace as well.

The upshot: for the September quarter, EBITDA (earnings before interest, tax, depreciation and amortization) margin contracted by 215 bps year-on-year to 10.7 percent.

Accordingly, Siemens’ EBITDA declined by 5 percent year-on-year to nearly Rs 429 crore, lower than analysts’ estimates. Against this, revenues rose almost 14 percent to Rs 4,000 crore, driven by the infrastructure division with a robust 37 percent growth. The digital industries segment also did well, growing 24 percent. On the other hand, the gas and power segment’s revenues were flattish.

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To be sure, the company has done well for the year as a whole. Reported FY21 revenue and net profit increased by around 31 percent and 40 percent, respectively, versus the same period last year. EBITDA margin for FY21 expanded by 122bps year-on-year.

Meanwhile, the order backlog is at an all-time high of Rs 13,520 crore “We are now at pre-Covid-19 volume levels with a record order backlog. As government investment in infrastructure continues and capacity utilization levels increase, we believe tendering for private sector capex will pick up in the months ahead,” said Sunil Mathur, managing director and chief executive office, Siemens.

To be sure, Siemens’ shares have risen by nearly 38 percent this calendar year, suggesting investors are factoring a good portion of the optimism into the price.

There are some worries, however. “Re-rating of the stock has been quite steep and fails to acknowledge the rising dependency on strong order inflows as well as margin risks in the business,” said analysts from Motilal Oswal Financial Services Ltd in a report on November 24.

The brokerage added, “The company needs to consistently surprise on order intake to meet revenue growth expectations.”

Nomura Financial Advisory and Securities (India) Pvt Ltd’s target price for Siemens is Rs 2,355 per share. “Key upside risk is a sharp rise in the Indian industrial capex, while likely rise in commodity prices and slower pace of industry automation and digitalization are downside risks,” said Nomura’s analysts.

The Siemens share closed at Rs 2,154, down 5.3 percent, on the NSE.

 
Pallavi Pengonda
first published: Nov 25, 2021 04:34 pm

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