During its analyst meet, Siemens highlighted promising growth opportunities across various segments. The company unveiled plans to demerge its energy division and expressed intentions to enhance localization across different sectors. Siemens exhibits optimism regarding growth prospects in the domestic market, emphasizing both government and private capital expenditures.
Here is the brokerage houses’ view
Jefferies on Siemens
Jefferies has revised its target price for the company to Rs 5,000 per share, up from the previous target of Rs 4,520. This adjustment suggests a potential upside of 28% from its current market price (CMP) of Rs 3,898.6.
Siemens Energy contributed 31 percent to the overall revenue, and the energy segment’s market is anticipated to receive a surge from capital expenditures in transmission, as well as High Voltage Direct Current (HVDC) projects.
Additionally, Siemens Energy holds the position of the second-best player in the expanding domestic small-sized turbine market, according to Motilal Oswal. The domestic brokerage expressed its belief that the entire demerger and listing process could span a period of 2-3 years.
Motilal Oswal on Siemens
Motilal Oswal expresses optimism for Siemens, providing a buy rating with a target price of Rs 4,600 in its research report dated December 22, 2023, targeting opportunities in transmission, railways, data centers, and select private capital expenditures.
According to the report, Siemens is positive about growth prospects in the domestic market for both government and private capital expenditures. The company is also optimistic about emerging opportunities in new areas such as semiconductors, batteries, and electric vehicles (EVs). Despite potential near-term impacts on order inflows due to the general election schedule, Siemens anticipates strong long-term prospects for order inflows, particularly in transmission, railways, data centers, and industrial automation. The potential demerger and listing of Siemens’s India Energy segment are seen as avenues for unlocking value over the next 2-3 years.
Motilal Oswal has marginally revised its estimates, factoring in slightly improved margins. The firm expects Siemens to achieve revenue/EBITDA/PAT CAGRs of 16%/18%/19% over FY23-26. The valuation remains at 55X P/E on two-year forward earnings.
Incred on Siemens
Incred Equities maintains its ADD rating on Siemens with an increased target price of Rs 4,400. The substantial momentum in order wins within the mobility segment has significantly fueled overall order inflow, ensuring extended revenue visibility.
Accounting for robust visibility in capital expenditure and order inflow, driven by digital penetration and government capex in railway and power Transmission & Distribution (T&D), Incred Equities has revised upward the revenue estimates by 2.1%/2.8% and earnings estimates by 2.4%/3.4% for FY24F/25F, respectively.
The ADD rating remains unchanged, and the revised target price is set at Rs 4,400 up from Rs 4,255 earlier, evaluating it at 60 times the Sep 2025F EPS. Incred Equities highlights a potential downside risk in the event of a slowdown in order inflow momentum.
Prabhudas Lilladhar on Siemens
Prabhudas Lilladher reaffirms its ‘Accumulate’ rating on Siemens while maintaining a target price of Rs 4,359. Following the recent Siemens India (SIEM) analyst meet, the brokerage notes that India holds a central focus for Siemens AG, the parent company, as it stands as their fastest-growing market.
Favorable economic indicators, along with stable inflation and interest rates, coupled with declining commodity prices, create a conducive environment for robust capital expenditure in the country. Public investments in infrastructure, with a high implementation rate (70-80% of the budgeted outlays), are set to complement a surge in private capital expenditure, especially as capacity utilization is expected to rise to 80-85% (currently at 75-80%, compared to 52-53% pre-COVID).
Additionally, Prabhudas Lilladher highlights the beneficial impact of Production-Linked Incentive (PLI) schemes, enabling customers to undertake additional capital expenditures. Key opportunities are identified in digitalization, automation, cybersecurity, data centers, railways, renewable energy, and power transmission & distribution.
The positive long-term outlook for Siemens stems from its robust and diversified presence across industries, emphasizing electrification, digitalization, and automation. Other factors contributing to the positive sentiment include product localization, a strong balance sheet, a healthy mix of public and private capital expenditures, and a focus on cost efficiencies.
Currently trading at a PE of 63.0x/54.5x SY24/25E, Prabhudas Lilladher maintains its ‘Accumulate’ rating on the stock with a target price of Rs 4,359 (up from Rs 4,241 earlier), valuing it at a PE of 60x SY25E (consistent with the previous valuation).
