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Siemens India Rating: Neutral; strong operational showing in quarter

Siemens India (SIEM)’s Q4FY20 efficiency was above expectations, with a 7% beat on the topline and 54% on working revenue v/s our estimates.

Siemens India (SIEM)’s Q4FY20 efficiency was above expectations, with a 7% beat on the topline and 54% on working revenue v/s our estimates. This clearly signifies faster-than-anticipated demand recovery. A beneficial mixture of the Services business, the execution of high-margin orders, and the sustenance of cost-cutting measures throughout the lockdown had been a number of the key parameters that led to greater working profitability and margin growth.

With order inflows up 9% y-o-y in Q4FY20, mgmt highlighted inexperienced shoots in finish markets reminiscent of Pharmaceuticals, Food and Beverages, and Power T&D. Other verticals reminiscent of Cement (waste warmth recovery), Buildings, Data Centers, and Refinery Infrastructure are additionally seeing ordering exercise. Factoring in the strong Q4FY20 efficiency and inspiring tempo of recovery, we improve our FY21e/FY22e EPS by 10%/3%. Maintain Neutral, with revised TP of Rs 1,420 (rollover to Sep’22e EPS; prior: Rs 1,210).



Strong beat on profitability

Q4FY20: Revenue declined 9% y-o-y to Rs 35.2 bn. Ebitda was up a strong 6% y-o-y to `Rs.5 bn. The Ebitda margin got here in at 12.9% (up 180bp y-o-y), largely led by a 210bp y/y growth in gross margins. PBT was down 13% y-o-y to Rs 4.5 bn on decrease different earnings and better depreciation. Adj. PAT was down 5% y-o-y to Rs 3.3 bn.

FY20: Revenue declined 24% y-o-y to Rs 98.7 bn. Ebitda declined 35% y-o-y to Rs 9.9 bn. The Ebitda margin stood at 10% (v/s 11.6% y-o-y). Adj. PAT was down 33% y-o-y to Rs 7.6 bn. OCF stood at Rs 6.8 bn (v/s Rs 12.1 bn in FY19), and FCF stood at Rs 6.6 bn (v/s Rs 11.1 bn in FY19). Cash stability improved additional to Rs 55.5 bn in FY20.

Siemens India (SIEM)’s Q4FY20 efficiency was above expectations, with a 7% beat on the topline and 54% on working revenue v/s our estimates. This clearly signifies faster-than-anticipated demand recovery. A beneficial mixture of the Services business, the execution of high-margin orders, and the sustenance of cost-cutting measures throughout the lockdown had been a number of the key parameters that led to greater working profitability and margin growth.

With order inflows up 9% y-o-y in Q4FY20, mgmt highlighted inexperienced shoots in finish markets reminiscent of Pharmaceuticals, Food and Beverages, and Power T&D. Other verticals reminiscent of Cement (waste warmth recovery), Buildings, Data Centers, and Refinery Infrastructure are additionally seeing ordering exercise. Factoring in the strong Q4FY20 efficiency and inspiring tempo of recovery, we improve our FY21e/FY22e EPS by 10%/3%. Maintain Neutral, with revised TP of Rs 1,420 (rollover to Sep’22e EPS; prior: Rs 1,210).

Strong beat on profitability

Q4FY20: Revenue declined 9% y-o-y to Rs 35.2 bn. Ebitda was up a strong 6% y-o-y to Rs 4.5 bn. The Ebitda margin got here in at 12.9% (up 180bp y/y), largely led by a 210bp y/y growth in gross margins. PBT was down 13% y-o-y to Rs 4.5 bn on decrease different earnings and better depreciation. Adj. PAT was down 5% y-o-y to Rs 3.3 bn.

FY20: Revenue declined 24% y-o-y to Rs 98.7 bn. Ebitda declined 35% y-o-y to Rs 9.9 bn. The Ebitda margin stood at 10% (v/s 11.6% y-o-y). Adj. PAT was down 33% y-o-y to Rs 7.6 bn. OCF stood at Rs 6.8 bn (v/s Rs 12.1 bn in FY19), and FCF stood at Rs 6.6 bn (v/s Rs 11.1 bn in FY19). Cash stability improved additional to Rs 55.5 bn in FY20.

Key segmental performances: (i) Energy – Revenue was down 5% y-o-y to Rs 15.8 bn. The Ebit margin stood at 12.1% (up 140bp y-o-y); (ii) Smart Infrastructure – Revenues had been down 15% y-o-y to `9.2 bn. The Ebit margin stood at 10.6% (up 110bp y/y); (iii) Mobility – Revenues had been down 16% y-o-y to Rs 3 bn. The Ebit margin stood at 13.8% (up 330bp y-o-y); (iv) Digital Industries – Revenues had been down 12% y-o-y to Rs 6.3 bn. The Ebit margin stood flat y-o-y at 7.9%; (e) Portfolio of Companies – Revenues had been up 4% y-o-y to Rs 1.3 bn. The Ebit margin stood at 8.5% (v/s 1.4% y-o-y). Results have been restated put up the sale of the Mechanical Drives business.

Valuation and consider

Our estimates don’t embrace contribution from the C&S Electric acquisition but; nonetheless, they do replicate decrease different earnings on its account. Valuations seize C&S Electric on an acquisition value foundation. We like SIEM’s product portfolio and various finish market publicity. The company is poised to learn over the long run, led by the area of interest companies of Industrial Automation and Digitalisation.

We worth SIEM’s present business at a goal P/E a number of of 38x on Sep’22e EPS and the C&S Electric business on the acquisition value. Note that our goal a number of of 38x is decrease than 45x ascribed to ABB – as one-third of SIEM’s business is uncovered to tasks.

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