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Siemens delivered a strong margin performance and also reported high other income to beat consensus in the January-March quarter (Q2) of FY24 (the company’s year-end is September 30).
In addition, it has opted to demerge the energy vertical with a 1:1 award of shares in the newly demerged entity which will be listed by the end of this year (CY25).
The reported growth in revenue and profit after tax (PAT) was 18 per cent year-on-year (Y-o-Y) and 70 per cent (YoY), respectively.
Margin expansion was due to an improved revenue mix, pricing gains and productivity measures.
Given a strong demand scenario, the prospects look good.
Order inflows stood at Rs 5,180 crore, down 13 per cent quarter-on-quarter (Q-o-Q), due to delays in finalisation as elections were a factor.
However, the enquiry pipeline is strong.
Demand is increasing in transmission, data centre, EVs, railways, semiconductor, electronics and hydrogen.
The planned capex is Rs 500 crore to capitalise on domestic and export demand.
Revenue at Rs 5,750 crore grew by 18 per cent Y-o-Y and 19 per cent Q-o-Q.
Growth was at 56 per cent Y-o-Y in mobility, and also good in smart infra (26 per cent) and digital industries (16 per cent).
The energy segment grew 5 per cent Y-o-Y.
The gross margin expanded by 100 basis points (bps) Y-o-Y to 32.5 per cent and employee costs reduced as a percentage of sales, leading to a 250-300 bps Y-o-Y expansion in Ebitda margin to 15.3 per cent.
Ebitda at Rs 880 crore jumped 41 per cent Y-o-Y.
Other income rose 175 per cent Y-o-Y due to the sale of real estate.
The PAT surged 70 per cent Y-o-Y to Rs 800 crore.
After order inflows of Rs 5,180 crore, the order book stands at Rs 46,200 crore (up 3 per cent Y-o-Y) – over 2x of TTM revenues.
The announced capex includes Rs 333 crore in Goa for GIS (Gas Insulated Switchgear) and Clean Air GIS technologies catering to industries such as data centres, metro rail, oil & gas, steel, T&D, among others.
In Aurangabad, it is investing Rs 186 crore in a new metro train manufacturing facility.
Along with these and prior capex committed to Power Transformers and Vacuum Interrupters, cumulative capex will cross Rs 1,000 crore.
Demand is being pushed by government capex, private capex from PLI schemes, data centres, renewable spending, and semiconductors.
Government projects were deferred during Q2FY24, while demand rose in transmission where the company is looking at HVDC projects.
The energy entity, Siemens Energy India (SEIL), will be listed by CY25-end with a mirror shareholding and shares allotted in the 1:1 ratio.
Both companies will have separate strategies.
SEIL will get technology access from parent Siemens AG.
The order book for energy stood at Rs 9,700 crore and revenue was Rs 6,000 crore as of FY23.
Siemens is expanding facilities across GIS, metro and transformers to cater to domestic and export demand. In smart infrastructure, GIS expansion will initially cater to export demand.
The C&S Electric subsidiary (which is a division) is already doing substantial exports.
For mobility, metros and coach factories will emerge as global hubs for exports.
The company also has an upcoming transformer facility. Higher exports should translate to better margins.
The company (and its India group companies) should be able to maintain 20 per cent plus CAGR for FY24-FY26.
It has large opportunities in Railways, T&D, and data centres.
As always, it remains very highly valued and the excellent results have led to earnings upgrades.
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