Siemens tanks 9% in trade; what's bothering the Street?

Siemens Ltd share price: Shares of Siemens Ltd (NSE: SIEMENS) slumped over 9 per cent on NSE on May 22, after the automotive company’s board on Friday approved the sale of low voltage motors and geared motors businesses to a Siemens AG subsidiary -- Siemens Large Drives India -- for Rs 2,200 crore and brokerages downgraded their rating.

“The Board of Directors of the Company, based on the recommendations of the Committee of Directors and the Audit Committee had approved the sale and transfer of the Company’s low voltage motors and geared motors businesses including the respective customer service business to Siemens Large Drives India Private Limited, (a subsidiary of Innomotics GmbH, (formerly Siemens Large Drives GmbH), which in turn is a subsidiary of Siemens AG), as a going concern on a slump sale basis, with effect from October 1, 2023,” the regulatory filing read.

According to brokerage firm UBS, the fair value– the estimated price at which an asset is bought or sold when both the buyer and seller freely agree on a price– could be around Rs 6000 crore (4X FY25E sales).

At closing, Siemen's scrip stood at Rs 3,404 on the NSE, down 8.56 per cent.

Brokerage view on Siemens

Phillip Securities has double downgraded its rating from ‘Buy’ to ‘Neutral’ and has cut the target price to Rs 3,477 apiece from Rs 4,328 apiece.

Nomura has also downgraded its rating from ‘Neutral’ to ‘Reduce’ and has raised the target to Rs 3,521 apiece from Rs 3,008 apiece.

Equirus Securities has downgraded its rating to ‘Sell’ from ‘Reduce’ and has raised its target to Rs 2,965 apiece from Rs 2,820 apiece.

BNP Paribas Asia has also maintained a ‘Reduce’ rating with a target price of Rs 2,850

On the other hand, Jefferies has maintained a ‘Buy’ and raised the target to Rs 4,500 apiece from Rs 3,565 apiece.

UBS has also raised the target price on Siemens to Rs 4,500 from Rs 3,900 with a ‘buy’ call. “We believe the read-through is far better than for peers, given: 1) increasing investments in high-growth segments with expanding value chain coverage – low voltage and mobility – coupled with a healthy order pipeline and much improved short-cycle demand trend; and 2) commentary during the global CEO's recent India visit implies a rising focus on India's manufacturing landscape for Siemens globally. We believe this could help SIEM clearly improve order intake, driving better growth,” the report read.

Among domestic brokerages, Prabhudas Lilladher has given an ‘accumulate’ rating on Siemens with a target price of Rs 4,018 apiece. “The low voltage motors and geared motors business will lead to readjustments in revenue and PAT, while there will be no major impact on valuations,” the brokerage said in its report.

The Board has also decided to consider the distribution of 100 per cent of the sale consideration as reduced by applicable Capital Gains Tax and any other applicable taxes, if any, on the transaction, as a special dividend, at the first board meeting after the completion of the proposed transaction.

For FY22, the business recorded revenue from operations of Rs 1,061 crore and profit from operations of Rs 132 crore equivalent to around 12.5 per cent of revenue. This represents around seven per cent of the company's revenue from operations and around nine per cent of its profit from operations. The company follows October to September financial year.

Siemens share price history

On a year-to-date (YTD) basis, Siemens stock has gained over 20 per cent as compared to Nifty50’s rise of 0.42 per cent. On a six-month basis, the stock has surged over 21 per cent against Nifty50’s rise of over 0.16 per cent.

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