Shares of Siemens Energy India rose as much as 3.5% to Rs 3,105.95 on the BSE on Tuesday after Jefferies initiated coverage on the freshly listed stock with a buy ranking and a rate target of Rs 3,500, implying a potential advantage of 12.7% from the existing levels.The rally follows a 4% gain on Monday, when the stock snapped a four-day losing streak after publishing better-than-expected quarterly results.In its initiation note, Jefferies called Siemens Energy India a Power Capex Play, forecasting a 50% CAGR in profits per share in between September 2024 and September 2027.
The brokerage stated it anticipates profits to grow at a 34% CAGR over the same duration, underpinned by a sharp boost in domestic power facilities spending.Siemens Energy profits to increase at 34% CAGR in September 24-27, Jefferies said, projecting Indias power capex to more than double to over USD 280 billion throughout FY2530, compared to FY1824.
The brokerage noted that transmission bids worth Rs 1.5 trillion were granted in FY25, 4 times the Rs 395 billion seen the previous year.The brokerage stated that the business is investing Rs 4.6 billion to double transformer capability and include large reactors to its product portfolio by December 2025, a relocation that shows managements development self-confidence.
Post-demerger, the business is 100% focused on the energy business and an essential beneficiary of the USD 100 billion+ transmission capex pipeline.Live EventsJefferies likewise flagged the business detailed energy portfolio and backing from its international moms and dad as drivers of future market share gains.Margin expansion led by operating leverageJefferies sees operating leverage as a crucial profitability lever that could drive a 460 basis point improvement in margins by FY27.
The brokerage stated that existing margins reflect sub-60% utilisation at the businesss transmission and circulation facilities.Fixed overheads, which represent approximately 40% of other costs, currently stand at 17% of incomes and are expected to decrease to 1112% by September 2027, making it possible for significant margin expansion.
Gross margin growth will contribute to margin upside.
Our strong 30%+ profits CAGR is at the essence of these estimates, the brokerage said.The companys order book increased 55% year-on-year to Rs 151 billion in March 2025, using strong profits visibility.The Rs 3,500 rate target values Siemens Energy India at 65x approximated Mar-2027 revenues, which Jefferies stated is a 5% discount to Hitachi Energy.
Peer companies like GE Vernova T&D and Hitachi Energy presently trade at 55x and 68x forward profits respectively.Jefferies noted that Siemens Energy India, which demerged from Siemens on April 7 and was noted on June 19, is Indias largest power equipment gamer by market cap at USD12 billion vs GE and Hitachi at USD7-10 billion.The brokerage flagged two drawback threats: a circumstance where repaired costs increase in line with or faster than incomes, and a downturn in power capex due to weaker demand.Strong quarter boosts momentumThe stocks current gains likewise follow robust Q2FY25 results.
Profits rose 24% sequentially, while the EBITDA margin can be found in at a healthy 19.1%, driven by strong efficiency in the power transmission sector.
Margins in the power generation service, nevertheless, remained soft.The company has published constant EBITDA margin enhancement over the past 2 quarters, even after accounting for one-off products.|Siemens Energy shares list at Rs 2,850 on BSE after demerger; growth potential customers bullish(Disclaimer: Recommendations, recommendations, views and viewpoints offered by the specialists are their own.
These do not represent the views of TheIndianSubcontinent)