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Last Updated : Nov 22, 2019 04:31 PM IST | Source: Moneycontrol.com

Siemens share price falls 3% on Emkay, Yes Securities downgrade

Motilal Oswal, Prabhudas Lilladher, however, maintain a buy call on the stock.

 
 
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Shares of Siemens declined 4.7 percent intraday on November 22 after Yes Securities and Emkay downgraded the stock after recent rally.

The stock has gained 35 percent in the last three months and more than 60 percent in the last one year. It closed at Rs 1,491.25, down Rs 52.45, or 3.40 percent, on the BSE.

"We downgrade the stock’s rating to sell after the strong run-up in recent months as near-term growth outlook remains weak due to a lack of private capex and expensive valuations. We remain underweight on Siemens in sector Emkay Alpha Portfolio," Emkay said.

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The industrial-manufacturing company ended FY19 (September ending) with a modest revenue growth of 7.5 percent, driven by digital industries (DI) and mobility segment. Gas and power (GP) and smart infrastructure (SI) segments clocked a sedate growth of 0-5 percent.

Order inflows grew 4 percent YoY, while order backlog fell 4 percent in FY19, indicating muted revenue growth outlook for FY20, said the brokerage, which still built in 12 percent revenue growth for FY20, hoping for a recovery in second half of FY20.

It expects 11-12 percent revenue/EBITDA CAGR over FY19-22.

"Although digitalisation remains a long-term potential, current revenue/profit contribution is negligible and over 70 percent of FY22 profit is derived from GP and SI segments. Thus, we believe valuing the entire company at a premium for an industrial recovery is unjustified," said Emkay.

Order inflow declined 14.3 percent YoY to Rs 3,190 crore in Q4FY19. Company let go some large orders which would have affected profitability.

Yes Securities also downgraded the stock to “reduce”, rating with a target price of Rs 1,491 based on 40x FY21E earnings.

"We downgrade FY21 EPS estimates by 5 percent to factor in lower revenue visibility and profitability assumptions. We expect SIEM to post revenue/EBITDA/PAT CAGR of 6/6/10 percent over FY19-21E, respectively. Post 35 percent stock rally in last three months, Siemens is currently trading at 44x/41x to FY20E/FY21E earnings, implying rich valuations," it said.

The brokerage said Siemens has shared weak core business outlook for FY20 and the export outlook, too, is not very exciting.

"Operating expenses for efficiency optimisation was doing well till Q3FY19, but it has also slowed down since last three-four months, which poses risk for base order inflow in our view. It does not expect large project orders soon & also not seeing any signs of a revival in private sector capex. Company see muted outlook for conventional power over medium term while renewables expected to do well," it added.

However, Motilal Oswal maintained a buy call on the stock, with a target price of Rs 1,792 from Rs 1,290 earlier, as it rolled forward estimates to September 2021 and value Siemens at 38x Sep’21E EPS.

"Our EPS estimate increase by 17/19 percent in FY20/FY21 mainly on account of lower tax rates," it said.

Prabhudas Lilladher also maintained buy call on the stock but with a reduced target price of Rs 1,687.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Nov 22, 2019 04:31 pm
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