Date Published: November 18, 2022
Siemens Ltd (Siemens India), a subsidiary of Siemens AG, is a provider of technology-enabled solutions. The company’s product portfolio includes building technology, energy, railway signalling equipment, drive technology, financing, healthineers, industrial automation, mobility, software, and consumer products. The company also provides various services such as IoT, real estate, business, and building technology services. Siemens India markets its products and services to various industries such as aerospace, automotive, construction, pharmaceuticals, food, and beverage, marine, mining, oil and gas, power utilities, transportation and logistics, cement, technology and communication, tire, and others. The company has business operations in Asia, Europe, the Middle East, Africa, and North America. Siemens India is headquartered in Mumbai, Maharashtra, India. The company reported revenues of (Rupee) INR136,392 million for the fiscal year ended September 2021 (FY2021), an increase of 37.1% over FY2020. In FY2021, the company’s operating margin was 8.9%, compared to an operating margin of 7.8% in FY2020. In FY2021, the company recorded a net margin of 8%, compared to a net margin of 7.7% in FY2020. The company reported revenues of INR42,583 million for the third quarter ended June 2022, an increase of 12% over the previous quarter.
Manufacturing is a key contributor to the economic development of any nation. The Capital Goods sector is critical to the manufacturing sector as it provides the much needed machinery and equipment to various manufacturing sectors such as Engineering, Construction, Infrastructure, Consumer goods, amongst others. The Capital Goods industry contributes about 12% to the total manufacturing activity in India which translates to about 2% of GDP. However, this is far lower compared with other countries such as China where the sector contributes 4.1% to its overall economy, 3.4% in Germany, and 2.8% in South Korea. Quite clearly India is less capital intensive than these nations and as the proportion increases will lead to exponential growth with improved Incremental Capital Output Ratio (ICOR). The capital goods market In India is fragmented with majority of operational units in the Small and Medium Enterprise (SME) sector, beyond few large players. These are involved in low-value added fabrication and assembly works and cater to small segments of a sub-sector, often serving domestic demand only. Due to their low scale of operation they are unable to compete effectively with large foreign competitors. The growth of the Capital Goods sector in India has been led by increasing demand. However, the sector is less self-sufficient and depends upon imports to meet its domestic requirements to a large extent. The country meets almost 40% of its demand through imports. In order to reduce dependence on imports and boost domestic manufacturing, the Government of India came up with various measures such as National Manufacturing Plan (2012), Make in India (2014) and National Capital Goods Policy (2016). The National Capital Goods Policy (2016) envisages increasing production capital goods from Rs. 230,000 crore in 2014-15 to Rs. 750,000 crore in 2025. It envisages increasing exports from 27% in 2014-15 to 40% in 2025 of production while increasing share of domestic production in India’s demand from 60% to 80%, thus making India a net exporter of capital goods.
Siemens Ltd (Siemens India) is a provider of technology-enabled solutions. High liquidity position, support from parent group, and revenue growth are the major strengths of the company, even as geographic concentration remains a cause for concern. Strategic initiatives, acquisition of C&S Electrical, partnerships, and joint venture with TRIL Urban Transport could provide growth opportunities for the company. However, competition, foreign exchange risks, and regulations could affect its operations. We remain positive on SIEMENS from a long-term perspective given its 1) strong and diversified presence across industries, 2)focus on digitization and automation products, 3) product localization, 4) healthy balance sheet and 5) high cash flow. Strong order book and enquiry pipeline makes Siemens attractive and value pick. We keep Buy dips approach on Siemens, As it has Shown strong Earning and price has followed the Earning , we see forward EPS at 37.35 F.Y 23 and 49.29 F.Y 24