Nuvama Brokerage has downgraded Siemens Ltd to a ‘Hold’ rating while slashing the target price by ₹1,350 to ₹7,000. The revision comes after the company’s Q4FY24 earnings call, which highlighted challenges in key business segments and delays in major order inflows.
Key reasons for the downgrade:
- Reduced target market in HVDC orders:
Siemens’ decision to focus on Voltage Source Converter (VSC) technology has limited its opportunities in India, where Line Commutated Converter (LCC) technology is preferred for most government HVDC projects. - Railways and mobility segment challenges:
Significant delays in locomotive and trainset orders were noted, with no large tenders expected in the near term. Additionally, some orders may be redirected to Indian Railways’ factories, further limiting Siemens’ growth potential in this segment. - Weaker margins compared to peers:
Siemens’ energy segment reported adjusted EBIT margins of 13.2% for FY24, lagging behind competitors such as CGPIL, TRIL, and GV T&D, which posted margins between 15–20%.
Capex and investments:
Despite these challenges, Siemens has announced INR4.6bn in capex for its energy business, including increasing transformer capacity by December 2025. The company is also investing INR1.86bn to establish a metro train manufacturing facility in Aurangabad, expected to cater to domestic and export demand.
Revised valuation:
Nuvama has cut its FY25–27 EPS estimates for Siemens by 9–15%, citing slower HVDC inflows and lackluster growth in key segments. The stock is now valued at 65x FY27E EPS of ₹106, down from the previous 70x multiple.
Nuvama’s downgrade reflects a cautious outlook on Siemens’ near-term performance, with limited triggers for growth. While long-term prospects remain intact, the company must address order delays and improve margins to regain investor confidence.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Always conduct your research or consult a financial advisor before making investment decisions.
