Siemens: Weak outlook on HVDC, Railways

At its Q4FY24 earnings call, Siemens sought to temper expectations on several fronts: (i) delays in large high voltage direct current (HVDC) orders, as India's preference for line-commutated converter (LCC) technology contrasts with Siemens' global focus on voltage source converter (VSC) technology; (ii) sluggish momentum in railway orders for locomotives and trainsets, with a potential higher allocation to Indian Railways factories; and (iii) muted performance in the LV business (smart infrastructure, including discoms capex and private capex in digital infrastructure).

Given the limited near-term catalysts in HVDC and railways, we are revising down our FY25E/26E/27E EPS estimates by 9%, 15%, and 11%, factoring in slower HVDC order inflows and operating margins of 14%. Consequently, we downgrade Siemens to 'Hold', with a target price of ₹7,000, valuing the stock at 65x FY27E EPS of ₹106.

A key trigger—chunky orders—now delayed. Energy segment: It largely constitutes HVDC and HV transformers and switchgears, and other products. Currently, there are only one to two projects (Pang-Kaithal in Leh & Khavda-South Olepad), which could use voltage source converter technology.