Accumulate Siemens; target of Rs 2602: Prabhudas Lilladher

Prabhudas Lilladher's research report on Siemens

We recently attended analyst meet of Siemens India, hosted by Mr. Sunil Mathur- MD & CEO and Mr. Daniel Spindler- CFO & Executive Director. Management highlighted that the current demand scenario continues to remain healthy led by continued traction in short cycle orders, large projects (from government as well as private players) witnessing an uptick and green field capex picking up in segments like data center, intralogistics (warehouse automation), batteries etc. Order inflows for H1SY22 came in at ~Rs106bn, up 63.3% YoY, driven by short and medium cycle orders. Despite challenging environment (higher commodity cost, increasing interest rate etc.) management indicated that the demand will likely continue for next 2-3 quarters. Traction continues from industries like Cement, Chemicals, Pharma, F&B, Steel, etc. Furthermore, segments such as data center, e-commerce, waste heat recovery, smart infra, digitalization, automation, TBCB, intralogistics, charging infrastructure, decarbonisation, smart metering, smart grids etc. would be key growth driver going ahead. Despite near term challenges from supply chain disruption (semiconductor shortage), higher commodity price and freight cost, we remain positive on SIEM from a long-term perspective given its 1) strong and diversified presence across industries, 2) focus on product localization, 3) solid balance sheet and 4) high cash flow. Considering their healthy demand outlook, focus on cost control and pickup in mobility segment we expect revenue/PAT CAGR of 14%/23% from SY21-SY24.

Outlook

At CMP stock trades at 67.5x/51.9x/43.6x SY22/23/24E. We maintain ‘Accumulate’ rating on stock with TP of Rs2,602 (same as earlier) (PE of 52x annualized Mar’24E EPS).