MOSL: SIEMENS (Neutral)-Margin led earnings miss; order inflows jump sharply
SIEMENS: Margin led earnings miss; order inflows jump sharply
(SIEM IN, Mkt Cap USD10.5b, CMP INR2192, TP INR2050, 6% Downside, Neutral)
Rich valuations fail to recognize the increasing dependency on strong orders
- SIEM’s 3QFY21 revenue more than doubled to INR27b (like-for like two-year CAGR at -4%) and was 8% above our expectation. EBITDA margin was weaker at 8.4% v/s our estimate of 10.3%, driving earnings miss of 16% v/s our expectation.
- Key positives include strong revenue growth in key segments of Smart Infrastructure and Digital Industries. Order inflows were quite strong at INR43b, driving order book to a record high of INR143b.
- SIEM has the most diversified portfolio, with offerings across various end-markets, which enables it to capture wider growth opportunities. However, underlying margin (adjusted for one-off cost control measures) has weakened across various segments. The stock has sharply re-rated in anticipation of a capex recovery, but fails to account for margin pressure in the business. The company needs to consistently surprise on order intake to meet revenue growth expectations. We broadly maintain our estimates and remain Neutral with a TP of INR2,050/share as we roll forward to Sep’23E EPS.
Siemens is an electronics products manufacturing group based in India. Co. is engaged in designing, manufacturing and marketing electrical and electronics products and equipments mainly for the power industry and the information and communication industry in India. Co. is also engaged in providing consultation services, providing back office support services and real estate management. Co. operates nine business segments with Healthcare as a separately managed business. Co.'s business segments include: Power and Gas; Wind Power and Renewables; Power Generation Services; Energy Management; Building Technologies; Mobility; Digital Factory; Process Industries and Drives; and Financial Services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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