Siemens (NS:SIEM) Ltd is a 75% owned subsidiary of Siemens AG (DE:SIEGn), Germany imitating its parent’s operations in India. For over six decades, Siemens India has been the preferred technology solutions provider. It has been conceptualizing and implementing various flagship projects in Mobility, Energy Management, Power and Gas, Smart Cities, Intelligent Infrastructure, Industrial Applications, Healthcare, and Smart Financing. Siemens India is also strengthening its digitalization portfolio and working on select applications in the country.
Siemens Ltd, the Indian operations of global major Siemens, is a play on India’s capital expenditure recovery. Siemens through its various business units serve the government and private requirements of fixed capital investments. We expect the private investment, which has remained low/stagnant for the past few years, to pick up 2019 onwards on account of growing utilization and better credit availability scenario in the economy.
Also, with the political uncertainties weeded out post elections, we can expect the public sector spending, which will be on the slow burner for H1CY19, to pick up post elections. This will help a company like Siemens improve its sales and profitability. With varied industries that Siemens caters to, the geographies and customers served, there is a natural diversification benefit which it tends to enjoy and the same makes it a defensive pick. It is backed by a global major which helps it retain a strong position in India in all industries it enters. Strong balance sheet, high cash on balance sheet, improving margin profile and return ratios help a player like Siemens maintain its rich valuations. We think investors could buy the shares at the CMP of Rs 1145.60 (~34.1x SY20E EPS) and add on dips to Rs 1036-1046 (~31x SY20E EPS) for sequential targets of Rs 1277 (~38x SY20E EPS) and Rs 1344 (~40x SY20E EPS) over the next 4-6 quarters. Read the complete research report from the below link: