Siemens – Start Accumulating the Shares at Declines

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Siemens - Latest Results

(in Cr.)
Jun-11
Mar-11
FY10-11
Revenue
2,796.81
3,118.19
12,106.41
Net Profit
154.78
277.69
845.43
EPS
4.55
8.16
24.95
Cash EPS
5.73
9.19
29.32
OPM %
9.02
14.27
11.16
NPM %
5.53
8.91
6.98

Siemens - Share Price Movement

 
 
 
Weekly H/L
716
661
Monthly H/L
818
652.25
52 Weeks H/L
951
652.25
 
( 26 Jul 11 )
( 24 Nov 11 )
Delivery / Var+ELM %
51.67
12.5
 
 
 

Siemens powers its way through technology

Share price movement of Siemens
Share price movement of Siemens | Source

Siemens powers its way through technology


Q1 results bad

Siemens has produced poor results for the quarter ended 30.06.11 when compared to the quarter ended 31.03.11. Revenue dropped from Rs.3118.19 crore to Rs.2796.81 crore. Revenue for the whole year 2010-11 was at Rs.12106.41 crore. Net profit declined abruptly from Rs.277.69 crore to rs.154.78 crore. Net profit for the whole year 2010-11 was at Rs.845.43 crore. Operating profit margin declined from 14.27% to 9.02%. Net profit margin declined from 8.91% to 5.53%. The shares of Siemens are being traded in the Indian stock markets (BSE and NSE) at Rs.669.45 now (BSE 14.12.11). The company is operating in heavy electrical equipments. For the year ended 30.09.11, Siemens recorded a net profit of Rs.845.40 crore which was a 2% growth over the previous year. But sales turnover grew at a respectable 28% to Rs.11942 crore. The company declared a dividend of Rs.6 per share of face value of Rs.2. The company’s net profit suffered because of foreign exchange losses during the quarter ended 30.09.11. The highest price recorded by the shares of Siemens in the past one year is at Rs.951 (26.07.11) and the lowest price is at Rs.652.25 (24.11.11). In other words, the present share price of Siemens is close to its lowest price in the last one year. This gives a temptation to the investors to buy the shares of Siemens at the current market price. Can one invest in Siemens now? Let us analyze.

Home appliances

Siemens is planning to invest 66 million Euros in a gas turbine test centre near Berlin. It is a multi national company. But it is facing intense competition both in India and abroad. But the company has an edge over its competitors because of its healthy order books and robust cash flow. BSH Home Appliances is selling Siemens’s brand of built-in kitchen appliances and other home appliances for the last 15 years. In addition, it is also selling Bosch home appliances. During the year, Siemens amalgamated some of its subsidiaries with itself like Building Technologies, Vista Security Technics, Siemens Healthcare Diagnostics and Siemens Rolling Stock. Dr. Armin Bruck is the Managing Director of Siemens.

Indian engineers excel

Siemens is planning to invest 250 million Euros (Rs.1700 crore) in India to develop 60 baseline products for the rural and urban markets. Siemens launched world’s first 1200 kV SF6 circuit breaker from its production plant in Aurangabad in Maharashtra State in India. The local engineers in the Goa plant of Siemens designed an X-Ray machine that proved to be 40% cheaper than what Siemens was manufacturing earlier. It proves the designing skills of Indian engineers. Siemens is banking on its SMART portfolio to grow big in India. It has sold 100 million Euros worth of SMART products in India in 2009-10. It has set a target of 1 billion Euros in 2020. It has assessed the potential for SMART products in India to be 21 billion Euros. 64 SMART products are under development and 32 of them will be launched next year. Undoubtedly India will play a larger role in the operations of Siemens.

Siemens behind attack on Iran?

It was alleged that Siemens AG withdrew huge funds from Societe Generale SA (SocGen) in Paris. It has been rumoured for quite some time that the French banks were to be downgraded by rating agencies. Maybe Siemens knew this fact in advance and withdrew the funds. Even without insider information, it is not a big thing to guess that the French banks were not performing well and faced downgrade. There is nothing wrong on the part of Siemens in doing so as it is a measure to protect its interests and that of its shareholders. Siemens has also announced that it is quitting nuclear energy business to focus on other technologies. The Russian turbine manufacturer OAO Power Machines, which is owned by the Russian billionaire Alexey Mordashov, will be the gainer from this move.

Plans for acquisitions

Siemens AG is Europe’s largest engineering company. The company has plans for acquisitions amounting to $19 billion. As valuations world over have plunged to abysmally low levels, Siemens AG is considering this as the right time for acquisitions. Siemens AG is eyeing on Dutch firms to strengthen its power business. The acquisitions in Netherlands may cost the company 170 million Euros. Siemens has tied up with Lynas to manufacture rare earth magnets. Lyans will be supplying raw materials to the joint venture with long term supply agreements. Siemens will have a 55% stake in the joint venture and Lynas the remaining 45%.

Reducing levels of radiation in CT scanners

The company’s new SOMATOM Definition Flash equipment combines with it all the characteristics to reduce radiation to the least possible level. This is the most important innovation in medical electronics as patients will be benefitted by low levels of radiation. Many CT scan procedures are done today in India than ever before. Radiologists and medical electronics professionals like Siemens are trying to minimise the radiation levels. In USA, 20000 CT scans are conducted every day. In India, the figure is around 7500. CT scans are conducted for detecting trauma, head injuries, chest & lung diseases, cancer, cardiac scans for coronary artery disease, TB, post operative assessment, pulmonary thromboembolism, sports injury, acute abdomen etc. Old generation CT scanners delivered radiation of 10 mSv to each patient as against the prescribed safe limit of 20-30 mSv (this safe limit is per annum and not for a single test). But the modern CT scanners as present in Lilavati Hospital, Mumbai deliver only 1-2 mSv of radiation per scan. This is because of usage of super-fast FLASH speed in the tests. Entire cardiac scan is completed in less than one second. Entire body scan is completed in less than two seconds.

Wind power in China

Siemens AG is eying on more wind power plants in China. Siemens and Shanghai Electric have signed an agreement for generating wind power. They will form two joint venture companies that will focus on Chinese power market. Siemens is keen to expand its operations in emerging markets. It is attaching top importance to China and India. It is planning to boost its growth with entry-level products. For example it launched the SST-600 steam turbine and is producing it in India. Increasing the local content of the turbine from 30% to a full hundred per cent cut costs of manufacture by a whopping 40%. Siemens is looking to outperform industry in the emerging markets.

Contender for Hyderabad Metro

Siemens has acquired a minority stake in the US-based pioneering solar power company Semprius. Details of investment have not been disclosed. Siemens has unveiled its hybrid electric aircraft at Paris Air Show. Cargo Service Centre India Pvt Ltd in partnership with Siemens and NIIT Technologies will set up a cargo handling facility for the International Cargo Complex at Delhi International Airport. Siemens AG is planning a 150 million Euro investment in Denmark for wind power generation. The company’s new turbine can tap even low wind areas for wind power. For the Hyderabad Metro rakes contract, Siemens is one among the 12 companies in the fray. BEML is also in the fray. A Siemens group company has charged Samsung and LG with patent violation in connection with its patents on LED technology on white and surface mountable LEDs.

Finance company

Siemens has secured permission from Reserve Bank of India to start its NBFC (Non Banking Finance Company) business in India. Siemens needs this finance company to sell its costly products in India. The finance company will be providing loans to the end-users to buy the equipments from Siemens. Iran has blamed Siemens for the Stuxnet attack. Iran accused Siemens of helping USA and Israel launch a cyber attack on its nuclear facilities. The German company Siemens AG increased its stake in its Indian branch Siemens India from the present 55.3% to 75% through an open offer. The offer period started in March and ended in April. 29% of all outstanding shares of the company were tendered by the Indian shareholders. This was 1.5 times the amount to be acquired. The open offer was made at Rs.930 per share.

Video services and solutions

Siemens has bagged a power plant order from UAE Siemens has bagged Chennai Metro Power equipment contract. Chennai Metro is implementing its metro rail project valued at Rs.14000 crore. Thyrocare Technologies Ltd has tied up with Siemens to set up a lab automation system. It will reduce time for testing samples by as much as three hours. Kaltura of USA, developer of world’s first open source online video platform and Siemens IT solutions and Services have tied up to offer video services and solutions to media organisations world over. The focus will be on enterprise, media, service provider verticals and education.

Accumulate the stock at declines

Investors may accumulate the stock of Siemens at declines because of the following reasons:

  • Siemens is a multinational company
  • Siemens has a long track record
  • Its engineering skill is admired throughout the world
  • Siemens is number one engineering firm in Europe
  • The parent company Siemens AG is interested in expanding its Indian operations. It has increased its stake in the Indian company from 55% to 75% through open offer
  • Many technological products of Siemens find ready acceptance in areas like home appliances, medical electronics, power etc

The present share price of Siemens is close to its lowest in the last one year

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