Accumulate Siemens; target of Rs 1251: Prabhudas Lilladher

We attended Siemens (SIEM) analyst meet and returned with a positive outlook in the medium‐to‐long term. SIEM highlighted that while some green shoots were visible in private capex, demand is largely driven by public capex. Transportation and Power T&D continues to be key growth drivers in near term for the company. The company is increasing its focus on providing digital solution to its clients. SIEM will focus on profitable growth and operational excellence. SIEM believes it is well geared up in terms of capacity and technology and is awaiting increase in orders to realize full potential. We expect stock to deliver earnings CAGR of 27% over FY16‐ 18E.

Outlook and ValuationThe stock is trading at 56.6x Sept‐17 earnings. We believe that once the economic recovery sets in, we will start to see significant order inflows leading to earnings upgrades. The focus on cost optimization and localization should help competitiveness, which, in turn, will help SIEM once the market recovers. Given its wide portfolio, the company is best placed to benefit from recovery in capex cycle as and when it happens. We expect the company to deliver earnings CAGR of 27% over FY16‐18E. We rate the stock as ‘Accumulate’.