By Nuvama Research
In its FY22 annual analyst meet, Siemens (SIEM) team narrated highlights across key verticals, re-iterating many structural trends driving new orders growth. Barring distribution and generation solutions, most other segments – railways, datacentres, conventional manufacturing (petrochem, F&B, auto, chemicals, steel etc.) – are driving new orders growth with some delays in TBCB (tariff-based competitive bidding) orders. On OPMs, FY22 includes `2.1bn forex/commodity loss, adjusted for which, SIEM has seen an impressive 12.2% margin. With no signs of slowdown in public ordering and capex so far. Management remains alert towards any global-led slowdown. Retain ‘BUY’ with TP of `3,550.
FY22 analyst call highlights
Siemens’ FY23 strategy: Despite robust orders Ebitda showing in FY22, Siemens remains confident of sustained growth in OI (open interest) and execution led by selective focus on large orders, good OB (organisation blocks) in hand and focus on supply chain etc. With no visible slowdown in private/public capex, growth in short-cycle products remains strong.
L1 status in 9000HP loco tender: Without talking on price levels, SIEM said they have put a competitive bid and would not like to comment on Alstom’s bid. In-line with 30 Siemens’ plants in India, exports of large loco components will remain key focus.
Robust new orders versus subdued execution: On a question of gap between OI and execution growth, management indicated back-ended delivery cycles and interdependence with global supply chain explaining this gap in general.
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Deep dive into FY22 performance: On a three year CAGR-basis, SIEM saw 14%/7% growth in OI/sales. Expansion at Nashik, Goa & Bogie plants should complement expanding OB, leading to better Ebitda translation over 2-3 years. We expect a HDD order intake and P/L scale-up over 2-3 years led by growing OB, execution ramp up and normalisation of OPM structure. While we come back more convinced on SIEMs mid-long term growth trajectory, near to medium term key variables includes profitability and execution ramp-up in line with SIEMs robust new order intake.