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MOSL: SIEMENS (Neutral)-Operating performance miss led by weak execution

Siemens: Operating performance miss led by weak execution

(SIEM IN, Mkt Cap USD6.8b, CMP INR1252, TP INR1285, 3% Upside, Neutral)

 

• 1QFY18 operating performance below expectations: On a reported basis, revenue increased 5.9% YoY to INR24.3b (est. of INR28.1b). Muted revenue growth can be attributed to a weak performance in the power & gas (-14% YoY), mobility (-30% YoY) and process industries and drives (-27% YoY) segments. EBIDTA improved 17% YoY to INR2.7b, with the margin at 11.2% (+100bp YoY; est. of 10.4%). Adjusted net profit from operations increased 18.6% YoY to INR1.9b, below our estimate of INR2.1b.
• Operating margin improves 100bp YoY led by better cost management: EBITDA margin of 11.2% came in ahead of our estimate of 10.4%, led by better cost management (other expenses down 190bp YoY to INR2.1b, or 8.8% of sales). EBIT margin expanded 170bp YoY to 8.8% on account of margin improvement across segments, barring the power & gas and mobility segments. Sharp margin improvement was witnessed in the energy management segment (+390bp to 10.6%) and digital factory segment (+320bp to 8.1%).
• Order inflow growth muted at 2% YoY; book-to-bill at 1.1x: Order intake for the quarter stood at INR32.6b (+2% YoY; INR32.2b in 1QFY17), supported by finalization of base orders (INR5.8b Ahmedabad Metro electrification order). SIEM’s book-to-bill stood at 1.1x, with an order book position of INR122.6b.