Kotak Securities maintains REDUCE on Siemens

Kotak Securities maintains REDUCE on Siemens

Siemens AG (parent of Siemens India Ltd) reported disappointing fourth quarter numbers for FY08 (September end).

Indian operations grew 12% and 9% in FY08 and Q4 FY08 (without adjusting for discontinued operations). The Indian operations of Siemens AG include several entities outside the purview of Siemens India and hence growth rates for Indian operations are not strict reflection of listed Siemens entity.

However since the major businesses of Siemens group are included under listed Indian entity, Indian operations is a broad indicator of listed entity’s performance.

In the first nine months standalone revenue of listed Siemens India entity grew 5.9%. Thus we expect modest revenue growth for listed entity in the fourth quarter numbers to be declared on 25 November.

We are not making significant changes to earnings. Maintain REDUCE call on the company and downgrade target price to Rs340 (Rs 550 earlier).

The stock is currently trading at 16.5x and 11.9x FY08 and FY09 earnings respectively. Note that sector leader ABB has been significantly derated in recent months and is trading at 16.5x and 13.5x CY08 and CY09 earnings respectively.