Siemens’ Demerger Offers Added Upside Potential, Jefferies Says

Global brokerage Jefferies said the demerger of Siemens Ltd. offers added upside potential to investors.

India’s Siemens yesterday said its board approved to demerge the company’s energy business into a separate listed entity, Siemens Energy India Ltd., to focus on the core portfolios.

Shareholders of Siemens will receive one share of the energy business for each share held in the company, and Siemens Energy India will be subsequently listed on the stock exchanges. The demerger is likely to complete in 2025.

“We believe the demerger has potential to create additional value as was seen with ABB India in the past,” Jefferies said in an investor note.

The brokerage also said Siemens, at its 1HFY24 analyst meet, highlighted that its 2QFY24 results reflected the continuous robustness in government infra spend and beginning of private sector capital expenditure.

“Going forward, we see the company benefiting from sizeable power transmission capex ordering, which should lead to operating leverage surprises with higher capacity utilization,” it added.

Jefferies maintained Buy rating on Siemens and lifted its base case target price to 8,000 rupees from 5,575 rupees per share. The revised target price factors a 2%-19% EPS revision for FY25-FY26, given better revenue growth and leverage, it said.

“Buy for power and railways,” the brokerage said, adding that 2025 demerger is an added upside potential.

Jefferies has a target price of 9,860 on Siemens, based on its upside scenario assumptions. The stock closed at 6,660.45 on the NSE yesterday.

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