Target: ₹4,600

CMP: ₹3,961

Siemens, in its analyst meet, highlighted growth opportunities across segments, plans to demerge its energy division, and plans to increase localization across segments. The company is optimistic about growth prospects in the domestic market across government and private capex. It is also positive about opportunities emerging from new areas such as semiconductors, batteries, and EVs.

Siemens has approved a capex of ₹416 crore for capacity addition for power transformers and vacuum interrupters. It also plans to improve localisation across segments as demand is strong. Localisation levels are still better for the energy, smart infrastructure and mobility segments; however, for digital industries, the company will remain dependent on imports from its parent. Siemens would still have near-term dependence on traded goods for the mobility segment, but has already embarked on localisation of component manufacturing for traction components for the mobility segment at its Nashik factory. These initiatives would gradually drive margin improvement.

We believe that near-term order inflows may be affected by the general election schedule; however, in the long term, order inflow prospects remain strong from transmission, railways, data centre, industrial automation, etc.

A potential demerger and listing of Siemens’s India Energy segment should open avenues for value-unlocking over the next two-three years. We marginally revise our estimates to bake in slightly better margins and expect the company to clock revenue/EBITDA/PAT CAGRs of 16 per cent/18 per cent/19 per cent over FY23-26. We continue to value it at 55X P/E on two-year forward earnings and maintain our BUY rating with a TP of ₹4,600.