Accumulate Siemens; target of Rs 1516: Prabhudas Lilladher

Prabhudas Lilladher's research report on Siemens

Siemens Ltd (SIEM) reported healthy set of numbers despite of challenging environment. During 4Q, better revenue was driven by higher share of services business, strong execution of OB and rising labour availability. Further better gross margins and cost control measures helped improve margins during the quarter. OI came in at Rs32bn, up 8.7% YoY led by improvement in ordering activity specially in energy and mobility segment. OB as on SY20 stood at Rs123.6bn, up 4% YoY providing revenue visibility for more than a year. Management highlighted that despite volatility in the business environment with core industrial sectors being negatively impacted, they have noticed initial signs of uptick across some markets post lockdown. Management remains optimistic on segments like Pharma, F&B and T&D to drive growth going ahead. We remain cautious in medium term owing to gradual pick-up in demand across the sectors, but on long term basis remain positive on the company due to its focus on Digitization and localization, diversified business, high cash flows and robust B/S cash position. We have increased our earnings estimates for SY21E/22E by 9%/8% led by improvement in gross margins.

Outlook

The stock is currently trading at 47.7x/40x SY21E/22E earnings. Due to current run-up in stock price we have downgraded the stock to Accumulate from BUY with a revised TP of Rs1516. (earlier TP of Rs1402).