Nuvama Institutional Equities has initiated coverage on Siemens Energy India Ltd. (SEIL) with a 'buy' rating and a target price of Rs 4,200, citing strong growth visibility in the power transmission and distribution (T&D) business and potential upside from high-voltage direct current (HVDC) opportunities that are not yet factored into estimates.
The brokerage expects SEIL to deliver 27% revenue CAGR and 28% EPS CAGR between FY26 and FY28, while maintaining a return on equity (RoE) of 28-30%. It sees the company benefiting from an order backlog of more than Rs 18,400 crore, equivalent to about 2.4 times FY25 sales.
According to Nuvama, the Power T&D segment, which accounts for around 65% of the order inflow, will remain the company's key growth driver amid sustained investments in grid infrastructure. Meanwhile, the Power Generation business, contributing roughly 35% of order inflow, provides an additional growth avenue and differentiates SEIL from pure-play T&D peers.
The brokerage estimates Ebitda margins will improve to 21.5% by FY28 from 19.3% in FY25, supported by a favourable business mix, higher exports and operational leverage.
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Despite delivering growth and return ratios comparable to industry peers, Nuvama notes that SEIL trades at a discount. The stock is valued at about 50 times FY28 estimated earnings, compared with around 60 times for comparable T&D players.
Importantly, Nuvama's forecasts do not include potential gains from Voltage Source Converter (VSC)-based HVDC projects or opportunities in the nuclear power segment, which could offer additional upside if order inflows materialise.
Using a valuation multiple of 60x FY28 estimated EPS of Rs 70.1, the brokerage arrived at its target price of Rs 4,200. Even under its bear-case scenario, which assumes lower margins and slower earnings growth, Nuvama estimates a fair value of around Rs 3,700 per share.
Key risks include increased transformer manufacturing capacity by existing and new competitors, which could lead to pricing pressure and margin risks after FY29. The brokerage also took cognisance of limited visibility on long-term HVDC and VSC-related orders, although it noted that this optionality is not reflected in the current market price.
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