Motilal Oswal maintains a ‘Buy’ recommendation for Siemens India, with a target price of Rs 8,400, projecting a 24% upside from the current price of Rs 6,799. Siemens is poised to benefit from an infrastructure-led capex cycle, fueled by digitalization, renewable energy initiatives, and increased investments in transmission and rail sectors. With a diverse portfolio and strong innovation capabilities, the company stands as a frontrunner in capitalizing on India’s energy transition. Motilal Oswal’s outlook underscores Siemens’s potential to maintain high growth, with projected revenue and earnings CAGR of 16% and 25%, respectively, from FY23 to FY26.

Strategic Positioning and Growth Drivers

- Expanding Capex Opportunities: Siemens India’s growth outlook is bolstered by increasing capex in sectors such as renewable energy, railways, and data centers. The company’s advanced technology solutions position it favorably to leverage these high-growth areas.
Siemens Xcelerator and Digitalization: The Siemens Xcelerator platform, with its extensive ecosystem of 11 partners and over 200 client references, enables industries to enhance efficiency and sustainability. This technology is increasingly adopted by sectors like food and beverage, data centers, and electric vehicle (EV) manufacturing.

Renewable Energy Transition: Siemens is capitalizing on India's renewable energy transition, supported by investments in high-voltage transmission, battery energy storage, and green hydrogen production. These investments align with the company’s broader strategy to drive energy efficiency and sustainability.

Innovation in Products and Solutions

- Energy and Mobility Segments: Siemens’s energy segment is positioned to gain from growing demand for high-voltage transformers, driven by renewable energy projects. Similarly, the mobility segment, especially in rail and metro projects, is anticipated to benefit from increased localization and export opportunities.
Advanced Technologies: Siemens has integrated innovative solutions like digital twins and the industrial metaverse, enabling clients to optimize supply chains, reduce energy consumption, and boost productivity. This suite of technologies is crucial for companies aiming to achieve sustainable manufacturing and net-zero goals.

Sustainable Manufacturing: Siemens is also focusing on sustainable manufacturing practices, bringing in suppliers and partners into its network to minimize environmental impact. This approach aligns with Siemens’s commitment to sustainability and offers a value proposition for environmentally conscious clients.

Operational Performance and Financial Metrics

- Revenue and EBITDA Growth: Siemens is expected to see a 16% revenue CAGR from FY23-26, reaching an estimated Rs 302.6 billion by FY26. EBITDA is projected to grow at a 24% CAGR, supported by operational efficiencies and margin improvement in the energy and mobility divisions.
Improved Margins: The EBITDA margin is forecasted to increase by 300 basis points by FY26, reaching 15.7%, up from 12.7% in FY23. This expansion is attributed to operating leverage benefits and improved efficiency in high-margin segments.

PAT Growth: Profit after tax (PAT) is projected to grow at a 25% CAGR over FY23-26, with a robust pipeline across renewable energy, infrastructure, and private capex. Siemens’s strong positioning in energy-efficient and digital solutions underpins this profitability outlook.

Valuation and Investor Outlook

- Comparative Valuation: Siemens trades at a P/E ratio of 77.7x for FY25E and 62.5x for FY26E. This premium reflects Siemens’s competitive edge in digitalization, energy transformation, and sustainable manufacturing, which are essential for industries adapting to regulatory and environmental shifts.
Investment Thesis: Siemens is well-positioned to capitalize on India’s capex cycle, particularly in transmission and high-voltage direct current (HVDC) systems. The company’s strategic investments in digital and sustainable technologies offer a strong value proposition for long-term growth.

Risk Factors: Key risks include potential delays in government-led capex projects and competitive pressures in large-scale bids, which may impact profitability. Additionally, related-party transactions within the Siemens group could weigh on performance if not conducted at market valuations.

Target Price and Investor Strategy

- Target Price: Motilal Oswal’s target price of Rs 8,400, representing a 24% upside, reflects Siemens’s growth potential in digital and energy segments. The valuation is supported by strong fundamentals, favorable market positioning, and continued capex in high-demand sectors.
Investor Recommendation: For investors seeking exposure to India’s infrastructure and energy sectors, Siemens presents a compelling case. The company’s emphasis on digital innovation and sustainable manufacturing practices positions it well to benefit from India’s evolving industrial landscape.