Siemens rides high on order inflow; sustaining momentum key

For the September quarter (Q4FY22), order inflow from continued operations stood at ₹4,009 crore, up 25% year-on-year (y-oy), which is nothing to sneeze at. Accordingly, order book stood at ₹17,183 crore, which is about 1.1 times the FY22 revenue, providing revenue visibility for the coming quarters.

Strong order momentum seen in the past couple of quarters is a factor that has aided investor optimism. Siemens’ shares have appreciated by nearly 24% in the last one year. “Siemens’ order inflow traction has improved significantly in FY22. Further, product mix has evolved towards high margin faster short-cycle orders leading to a robust y-o-y revenue growth in FY22. These factors have boosted sentiments for the stock,” said Amit Anwani, analyst at Prabhudas Lilladher.

In FY22, consolidated total operating revenue of Siemens grew by 22% y-o-y to ₹16,137 crore. Earnings before interest, tax, depreciation and amortization (Ebitda) margin fell by 38 basis points (bps) y-o-y to 10.9%. In Q4, execution saw moderation with revenue growth at 11.6% to ₹4,657 crore, missing analysts’ expectations. Higher other expenses meant Ebitda margin expansion was smaller than gross margin expansion.

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While announcing Q4 results, Siemens said it continues to see an increased pace of tendering for capital expenditure by both public and private sectors with rising interest in digital and sustainability solutions. Increased demand for automation and digitisation is a positive for Siemens’ digital offerings.

Growth prospects remain encouraging. “Similar to its peers such as ABB, Siemens’ growth outlook remains healthy (in contrast to Thermax), courtesy better infra/public capex outlook than private in our view,” said a Nuvama Research report on 22 November.

Execution is expected to improve after Q4. With a strong order book and enquiry pipeline, Prabhudas Lilladher expects Siemens to report a compound annual growth rate of 15.3%/ 26.4% for revenue/profit after tax between FY22 and FY24E.

Even so, the rise in Siemens’ shares suggest investors are factoring in the brighter picture to a good extent, which may well cap meaningful gains in the near-term. Strong order inflow could support the stock and thus maintaining the momentum is key. “Investors will watch whether Siemens’ quarterly run-rate of order inflows improves in FY23 from around the ₹5,000 crore seen in FY22,” Anwani said.