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MOSL: SIEMENS (Neutral)-Operational performance below expectations-continued focus on profitable growth

​Siemens: Operational performance below expectations; continued focus on profitable growth

(SIEM IN, Mkt Cap USD7.9b, CMP INR1420, TP INR1355, 5% Downside, Neutral)

• Operating performance below expectations: Siemens' (SIEM) 2QFY17 operating performance was below our expectations. On reported basis Revenue increased 5% YoY to INR29.3b (above est. of INR26.8b, revenue from continuing business up 23% YoY). EBIDTA stood at INR2.8b (-13% YoY), with the margin at 9.5% (-200bp YoY; est. of 12.9%). Net profit from operations stood at INR1.9b (-5.0% YoY), below our est. of INR2.6b.
  
• Gross margin contracts 190bp to 31.9%: Gross margin shrunk 190bp YoY to 31.9% in 2QFY17. EBITDA margin of 9.5% came in below our est. of 12.9%, primarily due to an adverse revenue mix, currency fluctuations and a change in accounting norms. EBIT margin from continuing business contracted 170bp YoY to 7.7% on account of margin compression across segments.
  
• Order inflow from continuing business up 96% YoY; book-to-bill at 1.1x: Order intake (continuing business) for the quarter stood at INR47.2b (+96% YoY; INR29.4b in 2QFY16), led by finalization of large-ticket orders of HVDC line of Pugalur-Trichur (INR1.7b). The company's book-to-bill stood at 1.1x, with an order book position of INR118.2b.