Reported net profit was Rs 310 crore. Excluding the impact of the new labour code, adjusted net profit was Rs 360 crore. Net profit was also boosted by higher other income and some one-off gains. The new order inflow was Rs 3,300 crore and the overall order backlog was Rs 17,590 crore (up 38 per cent Y-o-Y) — that’s a book-to-bill ratio of over 2.
Revenue hit Rs 1,900 crore, with operating profit at Rs 460 crore. Overall gross margin was 44.1 per cent (down 710 basis points Y-o-Y) and the operating profit margin expanded 210 basis points Y-o-Y to 24.1 per cent. The operating profit margin excluding one-offs such as forex and commodity gains was around 19 per cent. Other expenses came down, offsetting the gross margin compression.
In power transmission, revenue hit Rs 1,120 crore and segment profit was Rs 270 crore, up 60 per cent Y-o-Y, leading to 408 basis points margin expansion. In power generation, revenue was Rs 790 crore. The segment profit stood at Rs 160 crore (up 7 per cent Y-o-Y) with 165 basis points Y-o-Y contraction in margin to 19.7 per cent. However, Q-o-Q, the margin improved by 400 basis points in generation.
The company is expanding capacity. It has ongoing capex of Rs 740 crore, including Rs 460 crore for power transformers at Kalwa and Rs 280 crore for high-voltage switchgear capacity expansion at Chhatrapati Sambhaji Nagar. This will be completed in 12–15 months.
It has also announced new capex of Rs 2,060 crore for transformer capacity expansion of about 30 GVA, taking the total capacity to 60,000 MVA, with the new capacity to come online post FY30. The capex to create production capacity of 30,000 MVA is being funded through internal accruals. Management is betting on long-term demand momentum given the gestation periods.
Apart from revenue visibility given the outstanding order book, there are prospects of around Rs 1 trillion in new transmission bids per annum over the next 2–3 years. This implies a big equipment market, given the need for high-voltage and grid-stability equipment. The addressable equipment market may be Rs 35,000–50,000 crore every year and Siemens Energy is a market leader.
The energy transition policy targets 500 GW of non-fossil-fuel capacity by 2030, translating to around 43 per cent of green power consumption by 2030. Achieving this means balancing a mix of clean energy with conventional thermal. Overall, the grid will need to evacuate 900 GW by 2030 (versus 480 GW now) and much of the new power will be from diverse renewable sources. This creates a big opportunity for Siemens Energy. The generation segment’s growth is estimated to be a lower but respectable 10–12 per cent.
Siemens Energy is present only across VSC (voltage sourced converter) in HVDC, limiting the opportunity. Other players are also present in LCC (line commutated converters) and VSC HVDC, which has limited the company’s growth. This gap could affect valuations. There is a downside risk to margins if commodity prices escalate further.
The company has 10 factories which meet demand in India and South Asia (Bhutan, Nepal, Sri Lanka, and Maldives), where it holds the exclusive business rights for the Siemens Group. Analysts are looking at sustained 20 per cent growth in revenue and earnings over the medium to long term. While this looks possible and the company has a solid balance sheet, it also has very high valuations and it has gained significantly since the demerger.
