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Siemens: Power worries - Views on News from Equitymaster
 
 
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  • Jul 23, 2003

    Siemens: Power worries

    Engineering major, Siemens, reported an 8% increase in topline to Rs 9,877 m for 9mFY04. For the quarter ended 30th June 2003, net sales declined marginally.

    (Rs m) 3QFY03 3QFY04 Change 9mFY03 9mFY04 Change
    Net Sales 3,027 2,995 -1.1% 9,138 9,877 8.1%
    Other Income 67 62 -8.1% 310 324 4.4%
    Expenditure 2,851 2,828 -0.8% 8,527 9,220 8.1%
    Operating Profit (EBDIT) 176 167 -5.4% 612 657 7.4%
    Operating Profit Margin (%) 5.8% 5.6% 6.7% 6.6%
    Interest income (net) 32 31 -4.8% 87 88 0.2%
    Depreciation 59 53 -10.0% 201 169 -15.8%
    Extra ordinary income - - 69 344 398.6%
    Profit before Tax 216 206 -4.9% 878 1,243 41.7%
    Tax 95 51 -46.7% 300 384 -21.8%
    Profit after Tax/(Loss) 121 155 27.9% 577 859 48.8%
    Net profit margin (%) 4.0% 5.2% 6.3% 8.7%
    No. of Shares (eoy) (m) 33.1 33.1 33.1 33.1
    Diluted Earnings per share (Rs)* 14.7 18.7 23.2 34.6
    P/E ratio 18.7 10.1
    (* annualised)

    The major contributors to the sales turnover were automation & drives, power and healthcare businesses. Except power and real estate, other segments have shown a healthy growth. But since power is one of the major contributors, decline in its revenues for this quarter is a cause of concern. Power business is contract based so revenues are accounted only after the completion of the projects and management is confident that it will be able to make-up for the loss of revenues in the future. Moreover, if we look at the nine months results, the picture does not seem as bad. Though revenues for power segment have gone down by 12% but PBIT margins have improved from 3% to 4.7% (excluding extraordinary earnings from forfeiture of contract money) during 9mFY04.

    (Rs m) 3QFY03 3QFY04 Change 9mFY03 9mFY04 Change
    Information and communication 182 204 11.7% 457 561 22.9%
    Automation & Drives 862 1,038 20.5% 2,730 3,316 21.5%
    Industrial solutions & services 341 335 -1.5% 967 1,040 7.5%
    Power 992 713 -28.1% 2,883 2,527 -12.4%
    Transport 222 286 28.5% 637 958 50.2%
    Health care & other services 539 550 2.0% 1,756 1,996 13.6%
    Real estate 85 80 -5.5% 259 240 -7.3%

    Automation, transport and information & communication segments have shown significant growth in revenues in this quarter as well as over the nine-month period. The PBIT margins for information & communication segment have gone down but for automation they have doubled from 2.1% to 4.8%. For transportation business it has marginally improved from 15.5% to 16.3%. Automation business has perked up for the industry as a whole, as user industries are opting for smart and intelligent devices to run the systems.

    The operating income for 9 months FY04 rose by 7% YoY. However, the net profit for the period was up 49% largely led by extraordinary earnings. Excluding the extraordinary component, growth in profit before tax get pruned to 11% YoY. PBT for quarter ended June 30, 2003 was Rs 206 m as against Rs 216 m in the corresponding quarter of the previous year. The marginal dip of 5% is on account of some planned additional one-time costs booked in the current quarter against the healthcare business, which was not reflected in the previous quarter.

    The new order inflow of the company stood at Rs 11,805 m for the nine months ended June 2003, registering a substantial rise of 38% YoY. The new order inflow for the quarter ended June 2003 was Rs 3,920 m, registering a growth of 55% YoY.

    Looking at this, we can say that the slight dip in topline for the quarter is temporary because the orderbook is looking strong. Unexecuted orders stood at Rs 8,347 m at the end of June 2003, which is 85% of 9mFY04 revenues. Though the financials for the June quarter donít look too impressive, on a consolidated nine-month period the company looks in better shape. At Rs 350 the stock trades at a P/E of 10x its annualised 9mFY04 earnings. However, excluding extraordinary income, the P/E works out to be 16.9x annualised 9mFY04 earnings.

     

     

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