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Siemens’ strong order pipeline in the September quarter (Q2FY27), healthy execution and improving sequential margins suggest that the capital expenditure cycle is gathering momentum. But rising input costs weighed on profitability, raising questions about how much of the growth opportunity can translate into earnings.
Consolidated Q2 revenue increased 17% year-on-year to ₹5,734 crore, with broad-based growth taking it ahead of analyst estimates. The smart infrastructure business led the way, clocking 20% revenue growth to ₹3,281 crore. Mobility and digital industries grew 14% and 8% to ₹1,291 crore and ₹1,150 crore, respectively.
Smart infrastructure is expected to maintain its momentum, as investments in power distribution, grid modernisation, renewable energy integration and data centres create a favourable demand environment. Battery storage, electronics manufacturing and EV charging infrastructure offer additional opportunities.
Motilal Oswal Financial Services expects the segment to clock a 17% revenue CAGR over FY26-FY29, with Ebit margin ranging between 11% and 14%. As the segment gradually transitions from a hardware-centric business towards a solutions-led one, with a greater contribution from value-added products, software and services, Nomura expects its Ebit margin to improve from around 10% in H1FY27 to 13% by FY29.
Mobility could receive a leg-up from a ramp-up in locomotive deliveries, even as the broader railway, transportation and industrial capex cycles pick up pace. But its Ebit margin remains a concern, having compressed 364 basis points (bps) year-on-year to 7.5%. Digital industries’ Ebit margin compressed by 200bps to 5%, but Motilal Oswal believes the metric has stabilised around this level. Whether this marks the beginning of a sustained recovery remains to be seen.
Reflecting these opportunities, order inflows rose 38% to ₹6,228 crore, taking the order backlog to ₹47,034 crore. This provides revenue visibility of about 2.5 times trailing 12-month revenue.
Importantly, the management cited an improvement in private-sector capex, alongside sustained infrastructure spending, as a driver of order inflows. This broadens the demand base beyond government-led infrastructure projects, which tend to strain working capital.
Siemens has already reported an improvement in net working capital days to 74 from 79 in the year-ago period. H1 operating cash flow of about ₹1,300 crore also implies a healthy operating cash flow-to-Ebitda ratio of 128%.
But raw material costs rose at a faster 21%, pushing gross margin down 260 bps to 27.3%. Ebitda margin contracted by a smaller 150 bps to 10.9%, aided by lower employee and other operating expenses as a percentage of sales. It recovered 180 bps sequentially, suggesting that operating leverage and price hikes undertaken in smart infrastructure over the last one to two quarters are beginning to provide some relief.
Still, margins can be affected by aggressive bidding for large projects. The mobility segment appears particularly exposed to such competition-driven risks. A slowdown in government-led infrastructure orders or private-sector capex could moderate order inflows. Adverse foreign exchange movements are yet another risk.
The stock has gained 22% in 2026 and trades at about 53 times FY28 estimated earnings, according to Bloomberg consensus. Even factoring in the Q2 beat and stronger-than-expected sequential margin recovery, Nomura’s sum-of-the-parts-based target price comes to ₹3,944, just about 5% above the current market price. This indicates that much of the optimism around growth is already baked in, leaving little room for disappointment.
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