Pick-up in private capital expenditure critical for more gains in Siemens

Siemens posts mixed Q2FY26 results with strong mobility and smart infra growth, softer margins and below-estimate order inflows amid demerger-related adjustments

Even as the results of Siemens for the second quarter of 2025-26 (Q2FY26) were a mixed bag, the stock was the top gainer in the BSE 200 index, rising 4.92 per cent in trade. Most brokerages are neutral or positive on the company.

 

The revenues beat consensus estimates while operating profit and net profit were below expectations. The order inflows were reasonable, though lower than consensus. The financial year-ending has been changed to March (versus September), which makes direct comparison more difficult along with the tricky adjustments related to the demerger. This financial year will actually be extended to 18 months ending March 31, 2026.

 

Revenue expansion was led by mobility and smart infra segments, with sales at ₹5,171 crore (up 16 per cent year-on-year or Y-o-Y, and up 19 per cent quarter-on-quarter or Q-o-Q). Mobility revenues were up 29 per cent Y-o-Y at ₹1,135 crore, and smart infra was up 20 per cent Y-o-Y at ₹2,725 crore. Digital industries segment was flat at ₹1,067 crore, with management pointing to low order backlog and delay in pickup in private capex. The low-voltage motor segment reported 5 per cent Y-o-Y growth at ₹270 crore. Capex of ₹460 crore will add capacity in transformer and reactor businesses. 

 

Making a judgement about operating profit is also tricky due to the demerger. But gross margins at 29.4 per cent are down, and operating profit margin at 11.9 per cent is below consensus, with some expenses linked to the Siemens Energy demerger. Mobility margins at 11.1 per cent (up 300 basis points or bps Y-o-Y and up 730 bps Q-o-Q) are a big positive surprise. Adjusted net profit is up 3 per cent after excluding one-time gains on real estate.

 

The order inflows growth was at 10 per cent Y-o-Y at ₹4,800 crore, which is below consensus. The outstanding order book is ₹42,200 crore, which is up 6 per cent Y-o-Y, and over twice trailing 12-month revenues.

 

Private capex pickup will be key to stronger order flow, and especially crucial for a boost to the digital industries segment. Data centres in particular could be important, and easing semiconductor supply pressures may help with order momentum in digital industries. The guidance of the parent Siemens AG for FY26 suggests strong margins and momentum in smart infra and mobility could be sustained. Siemens is investing to make Aurangabad an export hub for mobility.

 

On a like-for-like comparison basis, order inflow growth stood at 20 per cent Y-o-Y for the trailing 12-month period while the trailing 12 months net profit has declined Y-o-Y even after adjusting for higher other income last year on real estate sales.

 

Siemens expects the government’s emphasis on infrastructure, and improvement in capex execution to support demand. This should translate into opportunities across railways, grid upgrades, distribution improvement, and smart energy systems. Smart infrastructure and electric vehicle (EV) charging are also expanding, and the increasing integration of artificial intelligence (AI) into operations and product offerings may enhance efficiency, although the pace of AI adoption is gradual.

 

The firm could be vulnerable to slowdown in government order inflows, and aggressive bidding for projects may adversely impact margins. Also, related party transactions may occur, with the parent and group entities at modest valuations, and this could weigh down performance. The company is cautiously optimistic about demand momentum eventually translating to pickup in private capex. As and when there’s a pickup in private capex, Siemens would be well-placed to cash in. The stock is relatively somewhat cheaper compared to its historical average.