Target: ₹3,690
CMP: ₹3,153.55
We attended Siemens India’s (SIL) analyst day, where management highlighted a possible pick-up in the private sector capex as private consumption increases on the back of recent income tax and GST rate cuts. The impact of tariff on exports continues to be an overhang and conclusion of the trade deal with the US will improve sentiment for incurring capex. Further, the government capex continues to drive growth as visible in new order inflow (OI) for Smart Infrastructure (SI) and Mobility (MO) witnessing growth of 21 per cent and 34 per cent (5-year CAGR; FY21-25) and revenue growth of 20 per cent and 38 per cent (5-year CAGR; FY21-25).
We expect an uptick in government capex on the back of low spending/base of FY25 and private capex is expected to pick up pace from Q3-FY27. SIL’s SI and MO business stands to benefit from this. SIL is on track for a total ₹600 crore of capex (SI/MO – ₹400 crore/₹200 crore over next 2 years) to fortify its local and export demand. It is shifting focus toward introducing more technology on the hardware stack and derive value for customers. Digital Industries (DI) is now in a recovery mode, post the prebuy during Covid as inventories have normalised.
Given a robust order book, export opportunities, and a strong product portfolio, we maintain Buy on SIL with a TP of ₹3,690. The bid pipeline remains strong and new awards are expected to pick up pace in the next few quarters.