Siemens India shares have slipped into the correction zone with continuous dropping in the past six sessions. The decline has got all the market analysts and investors talking after the latest management commentary in its recently announced December quarter earnings call. After a record high earlier this year, the shares have now fallen by over 16%, marking a significant decline that has led the stock into correction territory. In this blog, we’ll delve into the reasons behind Siemens India’s recent struggles, review the reactions from various analysts, and explore the company’s long-term prospects.
Siemens India Shares Performance: A Troubling Slide
Siemens India’s stock has been in a slide since December 20, 2024. The stock has been witnessing successive declines over the last two days that have left investors worried. The stock that has constantly been on the Indian bourses’ performer list now entered a correction phase and fell more than 2% in early trade on December 24. Despite this recent slump, Siemens India is still up 66% year-to-date (YTD), which indicates that the stock has had an overall strong performance in 2024, despite the recent setbacks.
The sharpest fall in the stock price occurred on December 20, after the company’s management provided some surprising updates during their earnings call. Investors were most disappointed by the management’s words that Siemens India would not be bidding for tenders in HVDC systems utilizing LCC technology. This is one segment that many investors have been hoping for Siemens India to enter; thus, the pulling out of the segment resulted in massive concern among investors as the share price dropped.
What Are HVDC and LCC Technology?
HVDC systems are applied in long-distance power transmission with minimal losses. These systems are highly crucial in efficient power transfer over a long distance and play an important role in large-scale energy infrastructure projects. LCC technology, which Siemens India did not apply in HVDC tenders, is a technology that is used to convert AC to DC and vice versa in HVDC systems.
HVDC systems are one of the backbone components in energy transmission networks, and Siemens India’s reluctance to participate in this tender was considered a backstep for investors as expected the company to grow its capability in this emerging market segment. This was also reflected in the massive downfall that Siemens India witnessed in stock prices in the days following the announcement of the earnings call.
Siemens India also presented mixed views on the outlook for the company’s performance in the coming months during the earnings call. The company emphasized that government capex would start to revive from January 2025, and that augured well for the economy at large. On the other hand, management noted private sector capex remained subdued, which indicated that demand for Siemens India’s product and service offerings might encounter some headwinds in the near term.
Management at Siemens India also pointed out the recent rebound in the manufacturing Purchasing Managers’ Index indicator, which stood at a nine-month low in October 2024. The PMI data was indicative of new orders and international sales driving growth in the manufacturing sector. This rebound should work in favour of Siemens India since it continues to operate in the industrial and infrastructure space, especially metro rail, signalling systems, and energy solutions.
However, the risks associated with uncertain private sector capex and strategic decisions related to HVDC tenders appeared to weigh the investors’ minds. It is this which reflects negative sentiment in the stock.
Demerger of Energy Business: The move towards the future
Siemens India has also announced the demerger of its energy business and that the process is in its final stages of demerger and completion of the same is anticipated during the second half of 2025. Thus, it may bring an eventual long-term effect on Siemens India’s growth profile. Analysts will be keeping tabs on this demerger and the potential value that it can unlock as well as simplify the business models for the company.
However, the success of this strategy largely hinges on the timely recovery of capex in the infrastructure and energy sectors. Siemens India is betting that government investments in infrastructure and energy will drive demand for its services in the coming years. The company’s future growth will depend on how quickly and effectively it can leverage this capex recovery and capture a larger share of the market.
1. Mixed Outlook by Analysts about Siemens India
The latest fall in the stock price, however, does not change the mixed outlook about the future prospects of Siemens India.
a) UBS:
UBS has maintained a neutral rating on Siemens India. The brokerage firm is cautious because of the company’s recent struggles, particularly related to the HVDC technology and the challenges in the private sector capex environment. While UBS sees long-term growth potential, they believe that the stock’s price is currently reflecting much of the positive news, making it a neutral call for the time being.
b) Elara:
The rating from Elara, another brokerage, is “Accumulate” on Siemens India, which means that it is advisable to buy this stock at current levels. However, the company will have to be cautious going ahead because of its strong position in infrastructure projects, especially for metros and signalling systems, which gives it a solid foothold in a rapidly growing market. That’s why Elara maintains an optimistic stance with some reservations.
c) Nuvama:
Nuvama has a “Hold” rating on Siemens India, which reflects a cautious view of the stock in the near term. Nuvama admits that the company has a strong market presence but believes that the stock will be under pressure given the current challenges in the private sector and the overall economic scenario.
d) Antique:
The bright side is that Antique maintained a “Buy” call on Siemens India, saying that growth opportunities are seen in the infrastructure space and government-driven capex recovery. The company has a strong position in key sectors such as energy, automation, and mobility, which will provide it with a solid foundation for long-term growth.
e) HDFC Securities:
HDFC Securities has a “Buy” rating with a target price of Rs 8114 for Siemens India, which is quite optimistic compared to recommendations from other brokerages. HDFC believes Siemens India will be able to leverage the value of its investments in the transport and energy sectors, for which it is very upbeat about the future growth potential of the company.
2. Solutions for Siemens India:
Despite the positives coming from a few analysts, Siemens India has some issues to address for continuing the growth path:
a) Private Sector Capex:
Private sector capex remains a cause of concern. Even though the company is sanguine about the rebound in government-led investments, private-sector expansion is something that is needed for a more widespread pick-up across the revenues for the company in the near term.
b) HVDC Tender Setback:
It is a question raised for Siemens India’s strategy in the power transmission segment following its decision to skip tendering for HVDC technologies, especially LCC. As HVDC technologies would be required for future massive energy transmission projects, Siemens India may lose this line of business.
c) Demerger of Energy Business:
Although demerger is expected to help the company streamline operations, it might create temporary uncertainty and investors will be watching the impact of restructuring closely.
Looking Ahead: Siemens India’s Growth Potential
Despite these challenges, Siemens India is still very well-placed to grow. The company is still reaping the benefit of its involvement in infrastructure projects such as metro rail development, signalling systems, and smart city projects. The demerger of its energy business could unlock value with a more focused strategy going forward.
In addition, government-directed investments in infrastructure, renewable energy, and transportation systems will continue to provide avenues for Siemens India. Here, the company’s excellent presence in these sectors combined with its technological expertise position it well to capitalize on these opportunities.
Conclusion: What Investors Should Expect
Siemens India is currently in a challenging phase with the stock price under pressure. However, the company’s strong market position, continued infrastructure projects, and capex-driven growth recovery give hope to investors. While the short-term outlook will be cautious due to challenges in the private sector and the HVDC tender decision, the long-term growth prospects remain promising.
Investors should watch closely as the company goes into the quarters ahead, especially as the demerger of its energy business comes through. The speed at which government investments come through and capex recovery in transport, energy, and infrastructure is going to be crucial to Siemens India’s growth prospects.
For now, analysts remain divided on the stock, but many see potential for long-term growth, especially as the Indian economy continues to grow and expand its infrastructure capabilities. Investors who are patient and willing to ride out short-term volatility may find that Siemens India offers a solid investment opportunity in the years to come.
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