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Siemens: One off credit saves the day
May 9, 2012

Siemens has announced the second quarter results of financial year 2012 (2QFY12). The company has reported 23.8% YoY and 10.8% YoY increase in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Sales increase by 23.8% YoY in 2QFY12 (September ending fiscal).
  • Operating margins decline to 13.0% in 2QFY12 from 13.7% in 2QFY11 on account of rise in overall expenditure as a percentage of sales.
  • Bottom line increased by just 10.8% YoY despite strong performance at the operating level due to fall in other income and rise in depreciation expenses.
  • It may be noted that during the quarter, the company revised estimated revenue and costs of certain projects which boosted the profit before tax by Rs 2.1 bn.

Standalone financial performance
(Rs m) 2QFY11 2QFY12 Change 1HFY11 1HFY12 Change
Sales 30,361 37,601 23.8% 55,977 60,916 8.8%
Other operating income 847 371 -56.2% 1,092 732 -33.0%
Expenditure 26,920 33,028 22.7% 49,090 55,450 13.0%
Operating profit (EBDITA) 4,288 4,944 15.3% 7,978 6,198 -22.3%
Operating profit margin (%) 13.7% 13.0%   14.0% 10.1%  
Finance costs 63 79 25.3% 76 125 63.5%
Other income 293 120 -59.0% 561 392 -30.1%
Depreciation 367 469 28.0% 712 901 26.5%
Profit before tax 4,151 4,516 8.8% 7,751 5,565 -28.2%
Tax 1,407 1,476 4.9% 2,627 1,818 -30.8%
Profit after tax/(loss) 2,743 3,040 10.8% 5,124 3,747 -26.9%
Net profit margin (%) 8.8% 8.0%   9.0% 6.1%  
No. of shares         340.3  
Basic & Diluted earnings per share (Rs)         11.0  
P/E ratio (x)*         34.3  
(*On a trailing 12-month basis)

What has driven performance in 2QFY12?
  • Siemens reported 23.8% YoY growth in sales during 2QFY12. All the segments registered healthy growth during the quarter. Sales from the Infrastructure and Cities segment increased 33% YoY while that from the energy segment increased 25% YoY. Revenues from the industry and healthcare segment registered a modest growth of 1% YoY and 14% YoY respectively.

    Segment-wise performance (Standalone)
      2QFY11 2QFY12    
    (Rs m) Sales % of total PBIT margins Sales % of total PBIT margins Sales growth Margin change
    Continuing operations                
    Infrastructure & Cities 6,680 20% 8.9% 8,894 22% 8.0% 33% -1.0%
    Energy 14,669 44% 14.9% 18,341 46% 18.1% 25% 3.2%
    Industry 9,341 28% 8.7% 9,429 24% 5.6% 1% -3.1%
    Healthcare 2,565 8% 9.8% 2,916 7% -4.4% 14% -14.2%
    Total* 33,256 100.0% 11.6% 39,581 100.0% 11.2% 19.0% -0.4%
    * Excluding inter-segment adjustments

  • Siemens' operating margins declined marginally to 13% in 2QFY12 from 13.7% in 2QFY11. The raw material expenses (excluding stock adjustments) as a percentage of sales declined substantially during the quarter. These expenses fell from 65.4% in 2QFY11 to 55.2% in 2QFY12. Even the employee expenses fell from 7.4% in 2QFY11 to 6.7% in 2QFY12. However, the other expenditure increased from 4.3% in 2QFY11 to 6.8% in 2QFY12.

  • Siemens' net profits increased 10.8% YoY during 2QFY12. Despite a strong performance at operating level, the net profit growth was curtailed due to fall in other income and rising depreciation expenses.

What to expect?
At the current price of Rs 712, the stock is trading at a multiple of 34.3 times its trailing twelve month earnings. It may be noted that significant development/changes in certain projects led the company to revisit its expected revenue and profit estimates for the future. This exercise boosted the profit before tax by Rs 2.1 bn during the quarter. While Siemens can emerge as a good play once there is a recovery in industrial capex, considering the expensive valuations and margin concerns, we continue to maintain our negative view on the stock.

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