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- Aug 2, 2010 - Siemens: Back on the recovery path
Siemens: Back on the recovery path
Aug 2, 2010
Siemens has announced its 3QFY10 results. The company has reported a 17% YoY and 23% YoY growth in sales and net profits respectively. Here is our analysis of the results.
Performance summary
- Sales grow by 17% YoY in 3QFY10 (September ending fiscal).
- Operating margins contract by 2.7% on account of a significantly higher cost of traded goods, and other expenditure (as percentage of sales).
- Net profits fall 54% YoY during the quarter owning to extraordinary income during the
- 3QFY09. Excluding the effect of this income, profits grow by 23% YoY during the quarter, largely due to a lower effective tax rate.
| (Rs m) | 3QFY09 | 3QFY10 | Change | 9mFY09 | 9mFY10 | Change |
| Sales | 19,096 | 22,349 | 17.0% | 59,067 | 63,114 | 6.9% |
| Expenditure | 16,606 | 20,044 | 20.7% | 51,643 | 54,788 | 6.1% |
| Operating profit (EBDITA) | 2,490 | 2,305 | -7.4% | 7,424 | 8,326 | 12.2% |
| Operating profit margin (%) | 13.0% | 10.3% | 12.6% | 13.2% | ||
| Other income | 159 | 115 | -27.8% | 2,679 | 604 | -77.5% |
| Interest expense/(income) | (118) | (181) | 52.5% | (377) | (486) | 28.7% |
| Depreciation | 199 | 249 | 25.1% | 565 | 714 | 26.5% |
| Profit before tax | 2,568 | 2,351 | -8.5% | 9,916 | 8,702 | -12.2% |
| Extraordinary income/(expense) | 2,106 | - | 2,106 | - | ||
| Tax | 1,304 | 790 | -39.4% | 3,091 | 2,944 | -4.7% |
| Profit after tax/(loss) | 3,370 | 1,561 | -53.7% | 8,931 | 5,758 | -35.5% |
| Net profit margin (%) | 17.6% | 7.0% | 15.1% | 9.1% | ||
| No. of shares | 337.2 | 337.2 | ||||
| Diluted earnings per share (Rs)* | 21.6 | |||||
| P/E ratio (x)* | 33.4 |
What has driven performance in 3QFY10?
- Siemens reported 17% YoY growth in sales for 3QFY10, while for 9mFY10 the company saw a 7% rise in sales. Segment wise, a rise in the business volumes of Siemens’ industry healthcare, distribution and oil & gas segments drove the topline growth during the quarter. However, the mobility business was the dampener during 3QFY10 as it saw a 35% YoY fall in sales and contributed 7% to the overall topline.
Segment-wise performance (Standalone) 3QFY09 3QFY10 (Rs m) Sales % of total PBIT margins Sales % of total PBIT margins Sales growth Margin change Industry Automation 1,205 6% 6.6% 1,526 6% 9.3% 27% 2.7% Drive Technology 2,360 11% 6.9% 3,156 13% 2.2% 34% -4.8% Building Technologies 1,144 5% 3.4% 1,434 6% 0.8% 25% -2.6% Industry Solutions 2,331 11% 7.3% 2,923 12% 12.4% 25% 5.2% Mobility 2,742 13% 3.7% 1,777 7% 4.2% -35% 0.5% Fossil Power Generation 750 4% 12.4% 255 1% 2.0% -66% -10.3% Oil and Gas 1,294 6% 18.3% 1,577 6% 1.3% 22% -17.1% Power Transmission 5,879 28% 22.1% 8,196 33% 13.7% 39% -8.3% Power Distribution 1,901 9% 1.5% 1,980 8% 6.8% 4% 5.3% Healthcare 1,137 5% -0.4% 1,926 8% 6.6% 69% 6.9% Real Estate 151 1% 115.8% 124 0% 80.4% -18% -35.4% Total* 20,892 100.0% 11.4% 24,875 100.0% 8.7% 19.1% -2.7% * Excluding inter-segment adjustments - Siemens' operating margins contracted to 10.3% from 13% in 3QFY10 on account of significantly higher costs for goods purchased for trading, as also 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.
- Siemens' net profits witnessed a fall of 54% YoY during 3QFY10. This was due to a onetime extraordinary gain in the same quarter of last fiscal. On excluding the same, profits grew by 23% during the quarter. For the first nine months, net profits were lower by 35% YoY. However, if one were to remove the extraordinary dividends received by the company from its erstwhile subsidiaries during 9mFY09, profits for the half year period fell by a lesser 16% YoY.
What to expect?
At the current price of Rs 721, the stock is trading at a multiple of 23.4 times our estimated FY12 earnings. Siemens' order backlog as at the end of June 2010 stood at Rs 135 bn, an increase of 34% over last year. The company booked orders worth Rs 94 bn during the nine months, thus registering an increase of 52% YoY over 9mFY09. The company has seen a strong growth in short cycle business (products) over the last nine months of FY10. It also has a robust order backlog from its long cycle projects business which will help the company going forward. However, we continue to maintain a cautious view on the stock (Research Pro subscribers kindly click Here).|
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