Overview:
BOB Capital Markets, a reputable financial institution, continues to uphold its ‘Buy’ rating on Siemens, a prominent player in the heavy electrical equipment sector. The target price is set at Rs 4,600, indicating a promising upside of 13.8%. Analysts Vinod Chari, Arshia Khosla, and Swati Jhunjhunwala express optimism based on Siemens’ robust order backlog and strategic positioning in the market.
Key Highlights:
- Order Backlog Surge: Siemens has witnessed a remarkable increase in its order backlog, soaring by 165% Year-on-Year (YoY) to reach Rs 45,520 crore at the end of Q2FY24. This surge in orders sets a positive tone for Siemens’ future performance.
- Potential Benefits from Indian Railways Order: The analysts anticipate substantial benefits for Siemens from a Rs 26,310 crore order for 1,200 electric locomotives from the Indian Railways. This order is expected to contribute significantly to Siemens’ growth trajectory.
- Private Sector Capex Plans: The analysts foresee a surge in incoming orders and tenders from private companies. With the private sector’s capacity utilization reaching 75%, a point at which new capex plans are typically made, Siemens is well-positioned to capitalize on this trend.
- Margin Expansion: Siemens has experienced margin expansion across various segments. The ability to negotiate better prices, except in the mobility segment due to factory ramp-up costs and Research and Development (R&D) expenses for the new rail order, has contributed to improved margins.
- Demerger of Energy Business: The analysts are closely monitoring the demerger of Siemens’ energy business, expected to be completed by 2025. This strategic move is a key aspect of Siemens’ long-term planning.
Positive Outlook and Sustainable Growth:
Chari, Khosla, and Jhunjhunwala express confidence in Siemens’ ability to sustain different capex cycles, backed by its strong order book and diverse customer base. The positive outlook is reinforced by Siemens’ advantageous position in benefiting from both public and private sector investments.
Conclusion:
BOB Capital Markets’ ‘Buy’ rating on Siemens reflects the analysts’ confidence in the company’s growth potential, driven by a robust order backlog, strategic orders from Indian Railways, and favorable market conditions. Investors are encouraged to consider Siemens as a promising player in the heavy electrical equipment sector.
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