Accumulate Siemens; target of Rs 4018: Prabhudas Lilladher

Prabhudas Lilladher's research report on Siemens

We attended Siemens (SIEM)’s analyst meet where management highlighted, board approval to carve out Low Voltage (LV) and geared motors business (part of Digital Industries segment; 0.12KW to 1.25MW capacity motors) for cash consideration of Rs22bn, translating to 2.1x revenue and 15.5x EBITDA (SY22), based on third party valuation and 100% distribution of proceeds as special dividend (post adjusting capital gain tax-likely to be ~23%). We believe that the sale is in-line with SIEMS long term strategy 1) to be a leading tech-oriented company, 2) consolidate its business in high-growth areas to achieve synergies and 3) move up in value chain by providing solutions for electrification, digitalization and automation. SIEM’s also announced acquisition of EV division from Mass-Tech Controls Pvt Ltd (MCPL) for cash consideration of Rs380mn (2.3x EV/sales). We believe that this acquisition will help to 1) address fast-growing demand for EV charging infrastructure in India, 2) expand local market presence, 3) enable creation of exports hub and 4) scale up its range of e-mobility solutions. We remain positive on SIEM from a long-term perspective given 1) its strong and diversified presence, 2) product localization, 3) focus on cost efficiencies and 4) recent large order wins in mobility business.

Outlook

We revise our estimates by -6.1%/-5.5% for SY24/25 (Sep’ yearend), owing to re-adjustment for slump sale of LV motors business. Maintain ‘Accumulate’ rating on the stock with revised TP of Rs4,018 (Rs4,254 earlier), valuing it at 57X Sep’25.