11 May 2021
2QFY21 Results Update | Sector: Capital Goods
Siemens
Neutral
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E Sep
2020 2021E
Sales
98.7
128.3
EBITDA
9.9
15.3
PAT
7.6
11.3
EBITDA (%)
10.0
11.9
EPS (INR)
21.3
31.8
EPS Gr. (%)
-32.6
49.3
BV/Sh. (INR)
266.1
291.4
Ratios
Net D/E
-0.6
-0.4
RoE (%)
8.0
10.9
RoCE (%)
8.4
11.4
Payout (%)
20.0
20.0
Valuations
P/E (x)
91.6
61.3
P/BV (x)
7.3
6.7
EV/EBITDA (x)
64.4
42.3
Div Yield (%)
0.4
0.3
FCF Yield (%)
1.4
2.0
CMP: INR1,949
TP: INR1,700 (-13%)
In-line earnings; margins surprise
SIEM IN
356
694.1 / 9.5
2055 / 990
6/29/34
1959
Cash generation remains strong, with focus on working capital
2022E
146.6
17.5
13.0
11.9
36.4
14.6
319.1
-0.5
11.4
11.8
20.0
53.5
6.1
36.6
0.4
1.8
Siemens (SIEM)’s 2QFY21 revenue growth of ~28% YoY suggests gradual
recovery – as the two-year revenue CAGR came in flat. Gross margins
contracted YoY, while EBITDA doubled – aided by lower employee costs (-
11% YoY) and other expenses (-33% YoY). Adjusted for strong cuts in other
expenses (7.3% of sales v/s 13.8% in 2QFY20), the margin trend seems to be
under pressure and needs monitoring over the next 1–2 quarters. Other
income declined 33% YoY to INR540m, despite a healthy cash balance,
suggesting the impact of declining interest rates on excess cash on the
balance sheet.
Smart Infrastructure and Digital Industries witnessed a strong rebound.
Order inflows stood at INR33b (up 17% YoY), with increased demand in the
Power Transmission, Digital Grid, and Distribution Systems businesses.
Within the Digital Industries segment, the Machine Tool and Process
Automation businesses saw healthy growth. The order book stood at
INR127b.
While the pace of recovery is very gradual, re-rating of the stock has been
quite steep. The ongoing second COVID wave poses a risk to execution. We
cut our FY21E EPS by 9%, while we maintain our FY22/FY23E EPS estimates.
We maintain our Neutral rating with TP of INR1,700 per share (42x Mar’23E
EPS). We prefer ABB over SIEM at current valuations.
Margin surprise offsets minor revenue miss
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Mar-21 Dec-20 Mar-20
75.0
75.0
75.0
10.6
10.6
10.2
4.4
4.2
4.2
10.1
10.2
10.6
FII Includes depository receipts
2QFY21 highlights:
Revenue grew 28% YoY to INR33.5b and
was 6% below
our estimate.
Gross profit grew just 6% to INR10.5b as gross margins
contracted to 31.4% (1QFY21: 31.7%; 2QFY20: 37.9%). EBITDA doubled to
INR4.4b and
was 10% ahead of our expectation,
led by 11.4% YoY decline in
employee costs. The EBITDA margin came in at 13.2% (+490bps YoY), far
ahead of our expectation of 11.3%. Adj. PAT almost doubled to INR3.2b and
was in line with our expectation.
Owing to normalized operations and the focus on working capital, CFO was
robust at INR7.3b, while FCF stood at INR6.7b.
Segmental highlights – a) Energy:
Revenue grew 16% YoY to INR11.9b. PBIT
margins came in strong at 15.1%.
b) Smart Infrastructure:
Revenue grew
35% YoY to INR10.5b. PBIT margins came in at 9.1%.
c) Mobility:
Revenue
was flat at INR2.3b. PBIT margins came in at 10.1%.
d) Digital Industries:
Revenue was up 50% YoY to INR7.9b. PBIT margins came in at 8.7%.
e)
Portfolio of companies:
Revenue grew 40% YoY to INR1.3b. The EBIT margin
stood at 9.6%.
Valuation and view
We cut our FY21E EPS by 9%, while we maintain our FY22/FY23E EPS
estimates.
Nilesh Bhaiya – Research Analyst
(Nilesh.Bhaiya@MotilalOswal.com)
Pratik Singh – Research Analyst
(Pratik.Singh@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.