Siemens Limited

Siemens Limited delivered a strong Q2 FY24, with revenue growing 19.3% driven by all businesses, notably Smart Infrastructure at 29% and Mobility at 59%. EBITDA reached 15%, marking a 240 bps increase year-on-year, attributed to volume growth, a positive product mix, and productivity measures. For the first half of FY24, revenue was up 20.6%, and the comparable EBITDA margin improved by 340 bps (excluding FX and Commodity Hedging impact). Profit before Tax for Q2 stood at 22.2%, with Profit after Tax at 17.1%, and Earnings per Share at Rs. 25.2.

The company announced significant CAPEX totaling over ₹1,000 crore, reinforcing its commitment to growth and localization. This includes ₹333 crore for expanding the Smart Infrastructure factory in Goa to produce Gas Insulated Switchgear and Clean Air GIS, and ₹186 crore for a new Metro train manufacturing facility in Aurangabad for the Mobility business. These investments are in addition to the ₹3,600 million announced in November 2023 for doubling power transmission capacity from 15 GVA to 30 GVA over the next 2-3 years, aiming to serve both domestic and global markets.

The Board approved the demerger of the Energy Business into a separate listed entity, Siemens Energy India Limited, a move expected to be completed by CY 2025. Post-demerger, shareholders of Siemens Limited will receive one share of Siemens Energy India Limited for every share held. This strategic separation aims to create two strong, independent entities with sharper business and market focus, leveraging Siemens Energy AG's technology portfolio to support India's transition to a sustainable energy future, with Siemens Energy India Limited having a backlog of almost ₹100 billion.

Management described the overall enquiry pipeline as robust, with strong demand in energy transmission, e-vehicle, and smart infrastructure. While some large orders were deferred from Q2 to Q3, the company's year-end order income growth plans remain intact. The industrial automation segment experienced a slowdown in ordering due to channel partner destocking, but profitability remains robust. Increased competitive activity is noted as a natural consequence of market growth, with Siemens aiming to maintain its market leadership by focusing on product and service offerings.

The Mobility business, which recorded an EBITDA margin of 3.5% in FY23, is undergoing heavy investments in manufacturing capacity, including the new Metro train facility in Aurangabad. These investments are expected to impact profitability for the next couple of years. However, as volumes increase and new capacities come on stream, margins are projected to improve, with the company expecting to return to prior double-digit margin levels within a few years, driven by scaling up and operational efficiencies.

Siemens is increasingly leveraging India as a manufacturing base for its global supply chains, particularly for Smart Infrastructure and Mobility. The new investments in Goa (GIS) and Aurangabad (Metro trains) are partly driven by export demand for sustainable products and global market needs. The energy business in India already exports to multiple markets, and the intent is to further expand this, utilizing India's capacity to serve global requirements as global capacity utilization is maxed out, demonstrating a significant appetite for manufacturing in India.