Siemens Energy India gains as Jefferies initiates coverage with “buy” call

Investing.com -- Shares of Siemens (ETR:SIEGn) Energy India rose after Jefferies initiated coverage with a “buy” rating and a price target of 3,500 indian rupees, implying a 21% upside from the July 4 closing price of 2,891.85 rupees. 

The brokerage cited strong earnings growth, improving margins and a robust power capex pipeline as key drivers for the positive view.

The company, demerged from Siemens and listed on June 19, is India’s largest power equipment firm by market capitalization at $12 billion. 

It operates eight manufacturing facilities across the country, offering power generation, transmission and industrial energy solutions.

Jefferies expects Siemens Energy India to deliver 50% compound annual growth in earnings per share between FY24 and FY27. 

EPS is projected to grow from 19.6 rupees in FY24 to 66.7 rupees in FY27, with net profit rising from 6.98 billion rupees to 23.75 billion rupees during the same period. Revenue is forecast to increase at a 34% CAGR, from 61.6 billion rupees in FY24 to 147.1 billion rupees in FY27.

The outlook is supported by a surge in India’s power infrastructure spending. Jefferies estimates total power capex to exceed $280 billion between FY25 and FY30—2.2 times the amount spent in FY18–24. 

Transmission projects, in particular, have gained momentum, with 1.5 trillion rupees in bids awarded in FY25 compared to 395 billion rupees the previous year.

Operating leverage is seen as a key contributor to the company’s margin expansion. EBITDA margins are expected to rise from 16.7% in FY24 to 21.3% in FY27. 

EBITDA is projected to grow from 10.3 billion rupees to 31.3 billion rupees over the same period. This improvement is tied to increased capacity utilization and slower growth in fixed costs. Employee expenses, for instance, are projected to fall from 13.5% of sales in FY24 to 9.0% in FY27.

Siemens Energy India’s order book stood at 151 billion rupees as of March 2025, up 55% year-over-year and equivalent to 2.4 times its FY24 revenue. Order inflows are expected to grow at a 27% CAGR, reaching 178.8 billion rupees by FY27.

Return metrics are also set to improve. Return on capital employed is projected to rise from 33.8% in FY24 to 54.5% in FY27, while return on net worth is expected to increase from 24.3% to 40.3% over the same period. 

Valuation multiples are seen normalizing, with the price-to-earnings ratio forecast to decline from 153.3x in FY24 to 45x in FY27.

Jefferies noted that downside risks include fixed costs rising faster than revenue and potential delays in power sector investments due to weak demand.