Buy Siemens; target of Rs 1263: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Siemens

Siemens Ltd (SIEM) reported good set of numbers with PAT was up 21% YoY at Rs2.5 bn (PLe Rs2.8 bn). In-line with its vision 2020, the company has changed its segmental reporting structure. In the new structure, the revenue growth (+4% YoY) came mainly from Mobility (+17% YoY) and Portfolio of Companies (+30% YoY), respectively. Order inflow during the quarter was up 6.4% YoY at Rs30 bn, taking order backlog to ~Rs130 bn. Overall investment climate looks weak, however management is positive on Digital Industries and Mobility segments. Sectors which are expected to drive growth are Food & Beverage, Chemicals, Water, Smart Infrastructures
(Data centers, Hospitals, Commercial offices and Airports), Captive Power and Railways. We expect SIEM to benefit from its strong focus on Digitalization/Automation opportunity due to very low penetration and industry's drive to improve efficiency.

Outlook

We expect SIEM to deliver earning CAGR of 15% over the next two years (FY18- 20E). The stock has witnessed sharp correction in the recent past and currently trading at attractive valuations of 37x/33x FY19/FY20E. Hence, we upgrade the stock to BUY from Accumulate with TP of Rs1263.

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