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Siemens: Sales down but orders up - Views on News from Equitymaster
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Siemens: Sales down but orders up
Apr 30, 2010

Siemens has announced its 2QFY10 results. The company has reported a 7% YoY and 20% YoY fall in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Sales fall by 7% YoY in 2QFY10 (September ending fiscal), rise 2% YoY in 1HFY10.
  • Operating margins contract to 12.3% on account of significantly higher cost of traded goods, employee costs and other expenditure (as percentage of sales).
  • Net profits fall 20% YoY during the quarter owning to margin contraction. Profits fall 25% YoY during the half year period, largely due to much higher other income in the comparable period last year.


Standalone financial performance
(Rs m) 2QFY09 2QFY10 Change 1HFY09 1HFY10 Change
Sales     23,682        22,124 -6.6% 39,971       40,795 2.1%
Expenditure     20,341       19,400 -4.6% 35,018       34,744 -0.8%
Operating profit (EBDITA)        3,341   2,724 -18.4%     4,954   6,051 22.2%
Operating profit margin (%) 14.1% 12.3%   12.4% 14.8%  
Other income 178       137 -23.3%     2,520       489 -80.6%
Interest expense/(income)     (94)     (117) 24.1%       (259)     (275) 6.2%
Depreciation     184       237 28.9%         385       465 20.6%
Profit before tax        3,429   2,741 -20.1%     7,348    6,351 -13.6%
Extraordinary income/(expense)        -               -                  -               -     
Tax        1,174       930 -20.8%     1,787    2,155 20.6%
Profit after tax/(loss)        2,255    1,811 -19.7%     5,561    4,196 -24.5%
Net profit margin (%) 9.5% 8.2%   13.9% 10.3%  
No. of shares          337.2   337.2  
Diluted earnings per share (Rs)*            26.9  
P/E ratio (x)*         26.1  
* On a trailing 12-months basis

What has driven performance in 2QFY10?
  • Siemens reported 7% YoY fall in sales for 2QFY10, while for 1HFY10 the company saw a 2% rise in sales. Segment wise, a rise in the business volumes of Siemens' industry automation, drive technology, industry solutions, building technologies and mobility segments that together contributed to 50% of sales gave some of the better sales performances during the quarter. However, the power transmission business was the dampener during 2QFY10 as it saw a 40% YoY fall in sales and contributed 24% to the overall topline.
    Segment-wise performance (Standalone)
      2QFY09 2QFY10
    (Rs m) Sales % of total PBIT margins Sales % of total PBIT margins Sales growth Margin change
    Industry Automation        1,224 4.7% 7.6%            1,701 6.9% 4.1% 39% -3.5%
    Drive Technology        2,947 11.4% 7.4%            3,573 14.5% 3.0% 21% -4.4%
    Building Technologies        1,205 4.6% 5.0%            1,577 6.4% 3.1% 31% -1.9%
    Industry Solutions       2,507 9.7% 9.8%            3,093 12.5% 8.2% 23% -1.7%
    Mobility        2,346 9.0% -3.2%            2,812 11.4% 11.1% 20% 14.3%
    Fossil Power Generation            840 3.2% 6.8%                284 1.1% 58.2% -66% 51.4%
    Oil and Gas        1,409 5.4% 16.8%            1,656 6.7% 8.4% 18% -8.4%
    Power Transmission        9,759 37.6% 21.4%            5,902 23.9% 19.8% -40% -1.6%
    Power Distribution        2,297 8.9% 9.9%            2,316 9.4% 8.2% 1% -1.7%
    Healthcare        1,223 4.7% 8.9%            1,678 6.8% 4.4% 37% -4.5%
    Real Estate            183 0.7% 78.1%                 131 0.5% 74.7% -29% -3.4%
    Total*     25,941 100.0% 13.1%        24,723 100.0% 10.6% -4.7% -2.5%
    * Excluding inter-segment adjustments

  • Siemens' operating margins contracted to 12.3% from 14.1% in 2QFY10 on account of significantly higher costs for goods purchased for trading, as also higher employee costs and higher other expenditure during the period (as percentage of sales). The drive technology and oil & gas business segments, with a big fall in PBIT margins, contributed towards the overall contraction in margins during the quarter.

  • In line with the lower sales as well as the contraction in margins, Siemens' net profits witnessed a fall of 20% YoY during 2QFY10. For the first half net profits were lower by 25% YoY. However, if one were to remove the extraordinary dividends received by the company from its erstwhile subsidiaries during 1HFY09, profits for the half year period increased by 37% YoY.

What to expect?
At the current price of Rs 702, the stock is trading at a multiple of 22.2 times our estimated FY12 earnings. Siemens' order backlog as of March 31, 2010 stood at Rs 134,450 m, an increase of 39% over last year. The company booked orders worth Rs 74 bn during the half year, thus registering an increase of 93% YoY over 1HFY09. The management of Siemens maintains a cautious outlook on the business front with the ongoing price pressures for the company. We continue to maintain a cautious view on the stock.

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