Valuations reflect growth prospects as Siemens Energy expands capacity

Siemens Energy's December-quarter results show strong revenue and profit growth, a rising order book, and major capex plans across transmission and generation as demand momentum builds

Siemens Energy delivered steady returns in the third quarter of 2025-26 (Q3FY26). Revenue grew 26 per cent year-on-year (Y-o-Y) and operating profit was up 37 per cent, with adjusted net profit climbing 52 per cent Y-o-Y. This beat consensus. The transmission segment had a standout performance, with revenue growth of 34 per cent Y-o-Y and 408 basis points (bps) rise in operating profit margin (OPM). Generation reported 16 per cent revenue growth.

 

Reported net profit was ₹310 crore. Excluding the impact of the new labour codes, adjusted net profit was ₹360 crore. Net profit was also boosted by higher other income and some one-off gains. The new order inflow was ₹3,300 crore, and overall order backlog was ₹17,590 crore (up 38 per cent Y-o-Y) – that’s a book-to-bill ratio of over 2.

 

Revenue hit ₹1,900 crore, with operating profit at ₹460 crore. Overall gross margin was 44.1 per cent (down 710 bps Y-o-Y), and OPM expanded 210 bps Y-o-Y to 24.1 per cent. OPM, excluding one-offs like forex and commodity gains, was around 19 per cent. Other expenses came down, offsetting the gross margin compression.

 

In power transmission, revenue hit ₹1,120 crore and segment margin was ₹270 crore, up 60 per cent Y-o-Y, leading to 408 bps margin expansion. In power generation, revenue was reported at ₹790 crore. The segment profit stood at ₹160 crore (up 7 per cent Y-o-Y), with 165 bps Y-o-Y contraction in margin to 19.7 per cent. However, quarter-on-quarter (Q-o-Q), the margin improved by 400 bps in generation.

 

The company is expanding capacity. It has ongoing capex of ₹740 crore — ₹460 crore for power transformers at Kalwa and ₹280 crore for high-voltage switchgear capacity expansion at Chhatrapati Sambhaji Nagar. This will be completed in 12-15 months.

 

It has also announced a new capex of ₹2,060 crore for transformer capacity expansion of approximately 30 Gigavolt-Amperes (GVA), taking the total capacity to 60,000 Megavolt-Amperes (MVA) with the new capacity to come online after FY30. The capex to create production capacity of 30,000 MVA is being funded through internal accruals. Management is betting on long-term demand momentum given the gestation periods.

 

Apart from revenue visibility given the outstanding order book, there are prospects of around ₹1 trillion in new transmission bids per annum over the next two-three years. This implies a big equipment market given the need for high voltage and grid stability equipment. The addressable equipment market may be ₹35,000-50,000 crore every year, and Siemens Energy is a market leader.

 

The energy transition policy targets 500 Gigawatt (Gw) of non-fossil-fuel capacity by 2030, translating to around 43 per cent of green power consumption by that year. Achieving this means balancing a mix of clean energy with conventional thermal. Overall, the grid will need to evacuate 900 Gw by 2030 (vs 480 Gw now) and much of the new power will be from diverse renewable sources. This creates a big opportunity for Siemens Energy. The generation segment’s growth is estimated to be a bit lower but respectable 10-12 per cent.

 

Siemens Energy is present only across VSC (voltage sourced converter) in HVDC (high-voltage direct current), limiting the opportunity. Other players are also present in LCC (line commutated converters) and VSC HVDC, which has limited the company’s growth. This gap could affect valuations. There’s a downside risk to margins if commodity prices escalate further.

 

The company has 10 factories, which meet demand in India and South Asia (Bhutan, Nepal, Sri Lanka, and Maldives), where it holds the exclusive business rights for the Siemens group. Analysts are looking at sustained 20 per cent growth in revenue and earnings over the medium-term to long-term. While this looks possible and the company has a solid balance sheet, it also has very high valuations and it has gained significantly since the demerger.