Prabhudas Lilladher Recommends ‘Accumulate’ Rating for Siemens with Target Price of Rs 7,362

Prabhudas Lilladher has recommended investors to “accumulate” Siemens shares, setting a target price of Rs 7,362. This suggestion comes from their research report dated August 12, 2024.

Key Highlights:

• Order Growth: Siemens saw an 18% increase in orders year-on-year (YoY), reaching Rs 62.5 billion. This growth was mainly driven by the Smart Infrastructure, Energy, and Mobility segments. However, the Digital Industries segment saw weaker order intake.
• Revenue Breakdown: In the third quarter of FY24, Siemens’ revenue was split as follows: 28% from Energy, 37% from Smart Infrastructure, 12% from Mobility, 18% from Digital Industries, and 5% from Portfolio Companies. This is slightly different from the same quarter last year, where Energy had a higher share of 31%.
• Revised Earnings Estimate: The company has slightly lowered its earnings per share (EPS) estimate for FY24 by 2.2% due to slower execution this year. Siemens reported a modest revenue growth of 6.8% YoY, with an improvement in EBITDA margin by 166 basis points (bps).
• Segment Performance: Despite the weak performance in Digital Industries, the overall order inflow remains healthy due to strong demand in Smart Infrastructure, Energy, and Mobility. The company is expected to benefit from the government’s focus on infrastructure spending and an increase in private sector investment.
• Investment in Capacity Expansion: Siemens has announced a capital expenditure of over Rs 10 billion this year to increase its manufacturing capacity in power transformers, vacuum interrupters, gas-insulated switchgear, and metro train manufacturing.

Positive Outlook:

Prabhudas Lilladher remains optimistic about Siemens’ long-term prospects due to:

1. Its strong presence across various industries with a focus on electrification, digitalization, and automation.
2. Product localization efforts.
3. A strong balance sheet.
4. Healthy capital expenditure from both the public and private sectors.
5. Potential value from the demerger of its Energy business.

Although the company’s revenue growth was lower than expected, the improvement in margins and reduced expenses contributed to better overall profitability. Siemens’ stock is currently trading at a high P/E ratio of 99.4x for FY24, 78.9x for FY25, and 65.4x for FY26.

Conclusion:

The report maintains an “Accumulate” rating on Siemens, with a revised target price of Rs 7,362, up from the previous target of Rs 7,030. The stock is valued at a P/E ratio of 73x for June 2026.