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| Siemens: Challenging times |
| Shobhana Subramanian / Mumbai Aug 18, 2009, 00:30 IST |
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Engineering firm Siemens’ order book has remained stagnant for more than two years at around Rs 10,100 crore but the stock has outperformed the market since May. Of course, it lost 5 per cent on Monday in a weak market.
 The encouraging news that came after the June 2009 quarter results were announced is that order inflows were higher about 26 per cent sequentially and 13 per cent on year-on-year. That was better than the performance in the preceding quarters, when inflows had dropped.
It was the power division, which fetches the company nearly half its revenues, that saw the largest inflows, winning a big order from Adani Power. Going ahead, orders are expected from transmission company Power Grid Corporation and once the economy gathers momentum, the company’s industrial division, which accounts for about a third of sales, should also revive. The division fared poorly in the June quarter with revenues falling and margins under pressure. In fact, Siemens numbers for the June quarter were rather weak with revenues up just 6 per cent at Rs 1,920 crore.
While operating margins came in at 13.4 per cent, analysts believe there could have been a one-time write back of previous provisions. Of course, margins were helped by raw material costs, which were lower by about 300 basis points. The bottom line was boosted by Rs 170 crore extraordinary items. Otherwise, it would have seen a slight fall compared with the June 2008 quarter.
Analysts believe operating margins are unlikely to expand in the year to September 2010 given the keen competition in the power segment. Unless there is a sharp pick-up in orders, revenues may not grow in double digits and that will leave the growth in earnings muted. At Rs 432, the stock trades at 19 times September 2010 earnings and is expensive.
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