Siemens shares extend rally after winning ₹20,000 cr Dahod locomotives project. Should you buy?
On Siemen emerging as the lowest bidder for manufacturing 1,200 electric locomotives of 9000 HP (horsepower) worth over ₹20,000 crore at Dahod in Gujarat, Amit Anwani – Research Analyst, Prabhudas Lilladher believes this order will boost the company's Motion business revenue growth ahead.
PremiumOne of the leading industrial manufacturing companies, Siemens witnessed strong buying for the third consecutive day on Thursday. In the early deals, the shares gained nearly a percent on BSE. So far this week, Siemens shares held a robust bull run and the reason would be the company emerging as the lowest bidder (L1) for the 9000 HP electric locomotives project in Dahod, Gujarat. This order is expected to boost Siemens' revenue growth going forward. Experts are optimistic about the stock.
At around 9.22 am, Siemens shares traded at ₹2,922.60 apiece up by ₹17.45 or 0.60% on BSE. The shares were near the day's high of ₹2,930.55 apiece. Its market cap reached over ₹1.04 lakh crore. On the previous day, Siemens shares climbed by nearly 7%.
On Wednesday, after gaining by at least 6.6% with an intraday high of ₹2,948.10 apiece, Siemens shares ended at ₹2,905.15 apiece higher by ₹138.75 or 5.02% on BSE.
Year-to-date, Siemens shares have jumped by nearly 24%. From its 1-year low of ₹2,150.75 apiece which was recorded on May 9, 2022, the company's stock has rallied by more than 36%.
Siemens is the flagship listed company of Siemens AG in India with businesses focusing on industry, infrastructure, digital transformation, transport as well as transmission and generation of electrical power.
On Siemens emerging as the lowest bidder for manufacturing 1,200 electric locomotives of 9000 HP (horsepower) worth over ₹20,000 crore at Dahod in Gujarat, Amit Anwani – Research Analyst, Prabhudas Lilladher believes this order will boost the company's Motion business revenue growth ahead.
Indian Railway expects the delivery of the first locomotive from the successful bidder from the Dahod facility in early 2024.
Notably, the 1,200 locomotives are set to be manufactured at the Dahod facility in 11 years from 2023-24 to 2033-34.
As per the government statement, the successful bidder will supply the first five locomotives in the first year which is scheduled in 2023-24, while the locomotives supply is higher to 35 in the second year (2024-25), and further to 80 locomotives each in third (2025-26) and fourth year (2026-27). The supply of locomotives increases to 100 each in the fifth year and sixth year. However, from the seventh year which would be 2029-30 to the 11th year i.e. 2033-34, the supply would be 160 locomotives each.
Indian Railways will utilise 9000 HP, 6 axle Co-Co Locomotive for hauling 4,500 tonnes load with an average speed of 75 kmph by the single loco.
Anwani remains positive on Siemen from a long-term perspective given its 1) strong and diversified presence across industries, 2) focus on digitization and automation products, 3) product localization and 4) healthy balance sheet.
In a note, Anwani said, "the stock is currently trading at a PE of 57.8x/48.8x SY23E/24E earnings. We have Accumulate rating on the stock with TP of Rs3,116, valuing it at PE of 55x SY24E."
On the other hand, in a research note dated December 7, Antique Stock Broking analysts said, Siemens, has emerged as L1 for the 9000 HP 1,200 electric locomotive project, which it is required to supply over a period of 11 years, starting FY24. The Indian Railways is on a multi-year strong CAPEX cycle with the national rail planning to spend ₹9.2 trillion during FY26E-31E as against ₹5.8 trillion during FY21-26E.
Antique's note further added, Siemens has put in place a strong infrastructure to take advantage of this huge upcoming railway CAPEX. Also, Siemens has developed an entire gamut of railway products comprising signaling and electrification, propulsion units, bogies, and electrical products to take advantage of this CAPEX.
On the valuation, the stock brokerage's note added, "We believe that Siemens will emerge as one of the biggest beneficiaries of the upcoming railway CAPEX and thus maintain a positive stance on the company with BUY rating and TP of INR 3,500 (55x its FY24E)."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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