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MOSL: SIEMENS (Neutral)-Operational performance ahead of estimates led by better execution

Siemens: Operational performance ahead of estimates led by better execution

(SIEM IN, Mkt Cap USD5.1b, CMP INR1016, TP INR1125, 11% Upside, Neutral)

 

• 1QFY19 operating performance ahead of expectations: Revenues grew 16% YoY to INR28.1b (v/s our estimate of INR25.9b) in 1QFY19 (year ending September). The revenue beat was primarily due to healthy performance in Energy Management segment (+9% YoY), Mobility segment (+22% YoY), Building Technologies (+49% YoY) and Digital Factory (+15% YoY). EBITDA grew 34% YoY to INR3.7b (includes forex gain of INR0.8b mainly in Power & Gas and Energy Management segment), with margin at 13% (+180bp YoY; v/s our estimate of 12.2%). Adj. net profit (adjusted for employee rationalization cost of INR596m in Process Industries and Drives segment) rose 51% YoY to INR2.9b, ahead of our estimate of INR2.2b.
• Operating margin ahead of estimates: Adjusted EBITDA margin of 13.0% was ahead of our estimate of 12.2%. Margin expansion of 180bp YoY was led by better cost management (other expenses as a % of sales declined 110bp YoY to 7.7%; INR2.2b). EBIT margin expanded 180bp YoY to 11.1% - margin improvement was seen across segments, except the Mobility and Infrastructure segments, which incurred losses. Sharp margin improvement was witnessed in Power & Gas (+840bp to 26.5%), Energy (+460bp to 16.8%) and Energy Management (+300bp to 13.6%).
• Order inflows muted on absence of large-ticket orders; book-to-bill at 1.0x: Order intake stood at INR33.9b (+4% YoY; INR32.5b in 1QFY18) due to the absence of large-ticket order finalization during the quarter. Base order inflow (orders with a ticket size below INR1b) was healthy and registered growth of 16% YoY. SIEM's book-to-bill stood at 1.0x, with an order book position of INR132b.