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Motilal Oswal Report
Siemens Ltd. remains in focus after Motilal Oswal raises its target price after Q6 results and retained a cautious stance, citing sustained margin headwinds from forex fluctuations and raw material inflation.
The brokerage has revised its target price to Rs 3,500 from Rs 3,150 earlier and maintained a ‘Neutral' rating, implying limited upside from the current market price of Rs 3,879.
Siemens' results for the quarter and full year stood largely in line with the brokerage's estimates, adjusted for the sale of the LVM business.
Margin performance was hit by a steep raw material price inflation and rupee depreciation, and with the short cycle nature of the contracts, these could not be passed on to the end users despite price hikes taken twice during the year by the company in select segments.
Order inflow has ramped up in the last two quarters, and the overall order book grew 9% for 18MFY26. This is also supported by a large order from the parent for the mobility division. The company is experiencing a strong demand outlook across segments, particularly data centers, electrification, and private capex.
Going ahead, the brokerage expects Siemens to benefit from-
- improvement in order inflows for smart infra and digital industries and
- locomotive delivery ramp-up in the mobility segment, thereby driving operating leverage.
However, Motilal Oswal expects forex and currency volatility to affect its margin performance for a few more quarters despite likely improvement in the smart infrastructure segment over the medium to long term.
The brokerage has revised its estimates by -1%/+4% for FY27/28 and revised target price to Rs 3500 based on 45x P/E two-year forward earnings.
Motilal Oswal has reiterate Neutral rating on Siemens.
Key risks and concerns
Key risks:
- a slowdown in order inflows from key government-focused segments,
- aggression in bids to procure large-sized projects would adversely impact margins, and
- related-party transactions with parent group entities at lower-than-market valuations would weigh on the stock performance.
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