 "Siemens Energy")
Siemens Energy India listed on Thursday at ₹2,840 and closed at ₹2,735. The equity base of the demerged entity is 356 million shares. This arm of Siemens Group will provide integrated products, solutions, and services across the value chain of oil and gas, power generation, and transmission. It may be described as an energy transition and decarbonisation play.
It has 10 state-of-the-art facilities in India and exclusive business rights across South Asia from the group. The estimated transmission and distribution (T&D) capital expenditure (capex) in India alone is projected to be about ₹9.2 trillion until 2031-32 (FY32). Apart from parentage, Siemens Energy has technology leadership, a strong product portfolio, infrastructure, and leadership in several verticals. It could find opportunities across the entire value chain.
India has plans to create 500 gigawatt (Gw) of renewable capacity by 2030, which will require a robust transmission network. The transmission system is being planned for 537 Gw of renewable energy (RE) capacity. This will entail a capex of ₹9.2 trillion by FY32, of which ₹6.6 trillion (71 per cent of total capex) will be allocated to interstate transmission, and the balance ₹2.6 trillion (29 per cent) to intrastate transmission.
About 191,474 cable kilometre of transmission lines and 1,274,215 megavolt-ampere (MVA) of transformation capacity are targeted for addition between 2021-22 and FY32. Several high-voltage direct current (HVDC) transmission corridors have also been planned for power evacuation. The company is a strong contender with its product portfolio.
India’s decarbonisation outlook means increasing adoption of RE, and Siemens Energy provides a comprehensive range of products and solutions, including energy efficiency systems like waste heat recovery. It also offers solutions for the electrification, digitisation, and automation of oil and gas, chemicals, petrochemicals, paper and pulp, sugar and ethanol, marine electrical traction systems, and defence (electrical traction systems for submarines).
An order backlog of ₹15,000 crore provides revenue visibility, and the potential order pipeline is healthy, with two large HVDC orders up for tender and expected to be finalised by 2025-26/2026-27 (FY27).
T&D capex, excluding these HVDC orders, also looks promising as mentioned above. The company could deliver revenue growth of over 20 per cent, with operating profit growth of 30 per cent over 2023-24 through FY27 at an operating profit margin that may reach 21 per cent or better. There may be a margin improvement due to strong demand for T&D equipment. Key risks include slowdowns in tendering and possible supply chain issues that could impact margins.
Siemens Energy India offers a wide range of services and solutions to power generation utilities and independent power producers. It also provides industrial gas turbines and steam turbines, typically used in captive power plants with capacities of up to 250 megawatt (Mw). It also supplies heavy-duty gas turbines of up to 600 Mw, as well as large utility steam turbines and generators of up to 800 Mw.
In the transmission segment, it provides air-insulated switchgear and gas-insulated switchgear (GIS), transformers, reactors, and traction transformers, along with engineering, procurement, and construction solutions and services. It is well placed to exploit end-to-end opportunities. Siemens is among the few players with competence in high-voltage lines up to 765 kilovolt.
The company is continuously investing in capacity expansion across transformers and GIS. In its last annual report, the (merged entity) company highlighted a capex of ₹460 crore for power transformers (doubling capacity from 15,000 MVA to 30,000 MVA), ₹330 crore for blue GIS, and ₹60 crore for vacuum interrupters.
Given that Siemens India (merged entity) traded at above 60x price-to-earnings, the demerged entity may receive similar valuations. Peer competitors like Hitachi Energy and GE Vernova have higher valuations. Analysts with buy recommendations are offering targets in the range of ₹3,000–3,150, though the stock fell 4 per cent on listing.
