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February 14, 2002

• We had recommended a BUY on January 21, 2002 at a market price of Rs196. Thereafter, the Siemens scrip has soared by around 46% to the current price of Rs282, a gain of Rs86. We are still bullish on the stock and reiterate a Buy even at these levels.
    
• Siemens reported excellent results for 1QFY02 inspite of recessionary conditions in the economy. It reported a 17% yoy increase in net sales and a 15% yoy increase in total income for 1QFY02. Net profit in 1QFY02 has grown by a healthy 29% yoy. The sales improvement was led by strong performance of the Automation & Drives, Medical Solutions and Power Transmissions & Distribution businesses.

• Operating profit has increased by 33% yoy and OPM also improved from 10.1% to 11.7%. Personnel costs (Rs366m to Rs363m) and other costs (down from Rs426m to Rs421m) have contributed to the improvement in OPM.

• During 1QFY02 new order intake was Rs3.3bn, an increase of 45% yoy. The volume drivers were the Medical Solutions, Power T&D and Automation & Drives businesses. The outstanding order book position as on December 31, 2001 stood at Rs8.33bn (Rs8.2bn in Dec 2000). While order backlog is relatively flat, the company’s order book now has more short lead projects and we are sanguine that its order intake during the year would be healthy.

• A per the ongoing buyback program, the Company bought back shares aggregating Rs465.23m and as a result the shareholding of Siemens AG has gone up to 54.63% from 45.37%.

• As a part of its portfolio restructuring, the company has divested its stake in Siemens Public Communications Network in favor of Siemens AG. Siemens presently has 4,140 employees, a further reduction of about 200 employees in the last one-year. The company is also nearly debt free with debt:equity ratio of 0.01:1.

• Valuations still appear attractive and the stock is likely to rally further in the near term. We once again recommend a BUY.

Risks:

• While Automation & Drives and Power segment contribute the maximum to the turnover, the PBIT margins in these businesses are the lowest. Real Estate and Information & Communication are the businesses have the highest margins, but are not the fastest growing businesses.

Team 5Paisa

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