Siemens stock falls 5% as inflation hits operating margins

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High raw material prices and logistics expenses weighed on the earnings performance of Siemens Ltd for the September quarter. Revenue grew 14% year-on-year (y-o-y) to 4,000 crore, but on a two-year CAGR basis, revenue was flat, analysts said.

CAGR is short for compounded annual growth rate.

Ebitda fell 5% y-o-y and Ebitda margin declined 200 basis points y-o-y to 10.7%.

Ebidta is short for earnings before interest, taxes, depreciation, and amortization. One basis point is one-hundredth of a percentage point.

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Reacting to the earnings, shares of the company fell more than 5% on the National Stock Exchange in opening deals on Thursday.

Ebitda margin missed consensus estimate of 12.6%. Higher commodity prices are one of the key downside risks for the stock, analysts at Nomura Financial Advisory and Securities (India) Pvt. Ltd said in a report.

However, one bright spot in the company’s otherwise muted earnings performance was its robust order book. The company’s order inflows grew 5% y-o-y to 3,380 crore, but moderated sequentially. Its order book stood at 13,500 crore, which is at an all-time high.

Further, its order book/revenue ratio stood at 1 times. The company’s management said that it expects pick-up in private sector ordering to aid order inflow growth.

Strong order inflows are imperative for its future outlook, given the rich valuations of the stock, said analysts at Motilal Oswal Financial Services Ltd. According to the brokerage house, the stock has sharply re-rated in anticipation of a capex recovery, but fails to account for margin pressure in the business. “The company needs to consistently surprise on order intake to meet revenue growth expectations,” added the report.

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