scorecardresearchAnand Rathi retains a buy on Siemens; Here's what the brokerage says

Anand Rathi retains a buy on Siemens; Here's what the brokerage says

Updated: 15 Jun 2022, 08:58 AM IST
TL;DR.

  • Optimism on the pace of its ordering is bright, led by investments (brownfield, greenfield) in various categories like data centres, railways, cement, steel, water, T&D, real estate, and other industries. This is further supported by companies’ sustainability focus, says Anand Rathi.

Siemens is targeting sustainability through a 'DEGREE' approach (de-carbonization, ethics, governance, resource efficiency, equity, and employability, the brokerage firm highlighted. Photo: Unsplash

Siemens is targeting sustainability through a 'DEGREE' approach (de-carbonization, ethics, governance, resource efficiency, equity, and employability, the brokerage firm highlighted. Photo: Unsplash

Brokerage firm Anand Rathi Share and Stock Brokers has maintained a 'buy' call on the stock of Siemens with a target price of 2,752, which is a 16 percent upside from the stock's June 14 closing price of 2,380.05 on BSE.

The brokerage firm highlighted the impressive order book of the company as its order-booking stint, which grew nearly 63 percent year-on-year (YoY) in the first half of FY22, continued, taking Siemens order book to a record about 17,200 crore (up 35.5 percent YoY).

Optimism on the pace of its ordering is bright, led by investments (brownfield, greenfield) in various categories like data centres, railways, cement, steel, water, T&D, real estate, and other industries. This is further supported by companies’ sustainability focus.

Siemens is targeting sustainability through a 'DEGREE' approach (de-carbonization, ethics, governance, resource efficiency, equity, and employability, the brokerage firm highlighted.

The company has installed 7MW of green energy in Kalwa and Aurangabad and will roll this out to other plants. On the demand front, with its products and solutions, the company sees sustainability traction from utilities, water management, real estate, industries, WHR and e- mobility, among others. In India, it is currently working with Ashok Leyland for charging infrastructure and has started with Chandigarh, then rolling this out to other cities.

Anand Rathi said the company is witnessing a robust tendering both from government and private, and management does not expect any slowdown in coming quarters.

Commodity pressures remain a headwind for all (Siemens, competition and customers). Price hikes are difficult to pass on in many cases due to customer resistance and stiffer competition, but it is managed by cost efficiencies and cost control.

Though brownfield expansion is showing significant traction, the company is also seeing greenfield capex in data centres, inter-logistics, warehousing, e-mobility and battery infrastructure, among others.

Government capex is seen in TBCB T&D, railways, utilities, metro-rail, airports and ports, among others. Management will focus on the execution of its current backlog, with cost efficiencies and cost controls, supporting margins and the focus on the short- cycle and the core business would help growth in the second half, said the brokerage firm.

With a resilient business model and backed by structural soundness, Siemens has picked up faster after the ebbing of Covid-19.

"We expect it to benefit from continuing government spending and the anticipated private-sector-capex recovery. Its greater focus on industrial automation/digitisation, remote monitoring, cost optimisation and greater profitability augers well for it," said Anand Rathi.

"The present order book offers the assurance of continued strong execution in coming quarters. The stock trades at 64 times/53 times FY22e/FY23e. From a long-term perspective, we are upbeat due to the company’s structural digitisation drive, widening product/service range and sturdy balance sheet," the brokerage firm added.

Disclaimer: The views and recommendations made above are those of the broking firm and not of MintGenie.

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First Published: 15 Jun 2022, 08:58 AM IST