Siemens Rises On Addressing Corporate Governance Issues
Shares jumped the most today since Feb. 2016 after the company said it wouldn’t transfer some Indian units to its German parent.
Shares of Siemens Ltd. jumped the most in nearly 40 months after the company said it wouldn’t transfer some Indian subsidiaries to its German parent.
The company said in an exchange filing it has decided to pause the sale of its mobility segment, mechanical drives business and subsidiary Siemens Rail Automation Private Ltd. to Siemens AG—which the industrial giant’s board had decided on Feb. 21, 2018.
The announcement addresses a material uncertainty in their view, Sumit Kishore, India infrastructure analyst at JP Morgan wrote in a report. Similar clarity on the impact on Siemens Ltd. of planned spin-off of the majority stake in the gas and power unit by the parent would make us positive, Kishore wrote.
Siemens Ltd.’s earnings for the third quarter, which was announced yesterday, was in line with the consensus estimate of analysts tracked by Bloomberg. Profit rose 21 percent year-on-year while operating profit jumped 25 percent. Topline increased 4 percent over last year, led by growth in its mobility and digital business. Yet, the company sounded a note of caution.
“We see a slowdown in capex-related ordering by customers on the private and public side across market verticals,” Sunil Mathur, Siemens Ltd.’s managing director and chief executive officer, was quoted as saying in a statement. “Liquidity is becoming a concern in the industry, with delayed payments and slowing inventory offtake,” he said, adding that his focus is on profitable growth and working capital management.
Philip Capital upgraded the company’s stock by a notch after the company’s results. Jonas Bhutta, research analyst at Philip Capital, said in a note valuations coupled with greater clarity on the status of its mobility business leaves little downside risk to estimates and valuations.
Clarity on the mobility business should benefit from European Train Control System level-2 ordering, Bhutta wrote. Lack of clarity on how the company intends to demerge its gas and power segment, he said, remains a key overhang on the stock in the near term.
The mobility and mechanical drives segments contribute nearly 8 percent and 17 percent to the Siemens Ltd.’s revenue, respectively, as of September 2018, according to Bloomberg data. Revenue contribution from the energy segment was around 41 percent.
Shares of Siemens Ltd. have risen nearly 10 percent so far this year compared with the Nifty’s 2 percent gain.