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  • Stock recommendation: Siemens — Sell — Target price Rs 1,000

    Publish date: August 9, 2018


    Results update: Running into rough weather

    Siemens ticked all the headline-making boxes for the quarter ended June. Growth in standalone revenues, profit after tax (PAT) and EBITDA suggests the company is heading in the right direction.

    And yet, the company seems to be on the back foot. With volatile margins, large orders running out and base orders remaining stagnant, the company is heading towards the unknown.


    Key highlights

    • Siemens reported a 16% jump (YoY) in their third quarter revenues, though it was 2% below our estimate. Siemens follows the October-September fiscal period.
    • The company posted a 33% rise (YoY) in EBITDA, which was in line with our estimate. The company profit after tax (PAT) grew by 25% (YoY), 3% below our estimate.
    • The company received an order inflow of Rs 28 billion in the quarter ended June, which is 3% down from the previous quarter. The order growth was healthy across all segments but the company failed to bag big-ticket orders from railways and power generation segments. This is why the order inflows were in the red this quarter.
    • Siemens largely manufactures electric motors and generators. It is also involved in electricity distribution and in the digital space. In this quarter, the energy management posted weak numbers — 13% growth but 10% below our estimates.
    • The company’s digital platform showed a 39% jump, thanks to their MindSphere platform.
    • Margin volatility remains a concern in all the businesses. The reasons remain unclear though.

    Valuation & outlook

    We feel the company’s revenues will be impacted due to weak performances in power and gas and the energy management segment. Depletion of order backlog and a low order base also remain a worry going forward.


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