Prabhudas Lilladher

Siemens (Accumulate)

CMP: ₹1,166

Target: ₹1,221

Our management meeting with Siemens indicated the sustained thrust of the company to transform itself from being a product company (62-65 per cent of sales) to a complete solution provider.

Siemens is focussed on 1) Digitisation and localisation; 2) Creating smart infrastructure; and 3) Increasing customer by leveraging its strong balance sheet and offering innovative financing.

Siemens will continue to focus on automation, signalling and electrification (Railways) in the mobility division (10 per cent of sales) post rejection of Siemens Alstom mobility merger by EU.

Capex cycle is yet to show signs of any major revival, however demand for Digit solutions/ automation across segments (auto, food & beverage, cement, oil & gas, sugar, etc) and cost control have enabled have Sales/PAT CAGR 4 per cent/28 per cent in the last four years.

We expect Siemens to deliver earnings CAGR of 14 per cent over the next two years (FY18-20E). We arrive at target price of ₹1221 as we rollover target price to March 2021 EPS. We maintain Accumulate.

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