Motilal Oswal Financial Services has initiated coverage on Siemens Energy India with a resounding BUY recommendation and a target price of Rs 3,000 per share, anchored on robust growth prospects in the transmission and distribution (T&D) sector. The newly listed entity, demerged from Siemens Ltd, stands at the forefront of India’s energy transformation, poised to capitalize on a multi-year investment cycle in T&D infrastructure. With a projected revenue CAGR of 25% and PAT CAGR of 31% over FY25–27, Siemens Energy India is expected to deliver superior margins and operational leverage, driven by capacity expansion and a buoyant order pipeline. Investors should note, however, that risks such as order slowdowns and supply chain disruptions could impact this trajectory.

Motilal Oswal’s BUY Call: Investment Rationale

Siemens Energy India debuts as a pure-play T&D powerhouse
Motilal Oswal has resumed coverage on Siemens Energy India with a BUY rating, assigning a target price of Rs 3,000 per share based on September 2027 earnings estimates and a 60x P/E multiple. The listing on June 19, 2025, marks a pivotal moment for the company, which was carved out from Siemens Ltd to focus exclusively on T&D and small turbine solutions.

Strategic positioning in a high-growth sector
The company’s business model is anchored in providing advanced solutions for power generation utilities, independent power producers, and industrial clients. Siemens Energy India’s portfolio spans industrial gas and steam turbines (up to 800 MW), heavy-duty gas turbines, and a comprehensive suite of T&D products, including AIS, GIS, power transformers (up to 765 kV), reactors, and traction transformers. This broad spectrum positions Siemens Energy India as a critical enabler in India’s power infrastructure buildout.

Sector Tailwinds: T&D Investments to Drive Growth

Massive capex cycle underway in Indian transmission
The Central Electricity Authority (CEA) forecasts Rs 3 trillion in investments for transmission infrastructure between FY25 and FY30, targeting significant capacity additions across high-voltage lines and substations. Siemens Energy India, with its technological prowess and manufacturing scale, is ideally placed to benefit from this surge, particularly in the 400 kV and 765 kV segments, which are vital for inter-state transmission.

Participation in HVDC and green energy corridors
While the company has historically been selective in HVDC projects, the emerging pipeline—spanning projects like Bhadla-Fatehpur, Khavda-South Olepad, and Leh-Kaithal—provides ample opportunity for Siemens Energy India to leverage its global expertise. State-level initiatives under the Green Energy Corridor Phase-II are expected to unlock Rs 120 billion in incremental investments, further expanding the addressable market.

Capacity Expansion: Foundation for Margin Acceleration

Ongoing capex to double transformer and GIS capacity
Siemens Energy India is investing heavily in its manufacturing footprint. Key projects include:

Rs 4.6 billion for doubling transformer capacity at Kalwa (from 15,000 MVA to 30,000 MVA)

Rs 3.3 billion for blue GIS in Goa

Rs 0.6 billion for vacuum interrupters in Goa

These expansions will not only support domestic demand but also enhance export capabilities, providing a structural tailwind to revenue growth as new capacities come online.

Financial Outlook: Robust Growth and Margin Expansion

Impressive revenue and profit trajectory
Motilal Oswal projects the following key financial metrics for Siemens Energy India:

Operating leverage and working capital improvements
Margins have already begun to expand in the first five months of FY25, with EBIT margin improving from 15.6% in 1QFY25 to 20.6% in the subsequent period. The company’s receivables from Siemens Ltd, once realized, are expected to further bolster other income and liquidity.

Valuation: Premium Justified by Sector Leadership

Peer benchmarking and valuation multiples
Motilal Oswal’s target price of Rs 3,000 is predicated on a 60x P/E multiple, reflecting Siemens Energy India’s superior margin profile and growth visibility. For context, Hitachi Energy trades at 74x P/E while GE Vernova T&D commands a 58x P/E on FY27 estimates. Siemens Energy India’s focused business model and ability to win large-scale projects justify its valuation premium.

Key Risks: What Investors Should Monitor

Order inflow volatility and supply chain risks
The primary risks to the investment thesis include:

Slowdown in order inflows, which could impact revenue visibility

Supply chain disruptions, potentially affecting margin expansion

Delays in capacity ramp-up or realization of receivables

Investors should keep a vigilant eye on quarterly order books and any macro headwinds that could temper the sector’s momentum.

Competitive Landscape: Siemens Energy India’s Edge

Comprehensive product suite and manufacturing scale
Siemens Energy India stands out for its end-to-end offerings across the T&D value chain, from high-voltage substations to digital grid solutions. Its manufacturing network—spanning Kalwa, Goa, Aurangabad, and Vadodara—provides the scale and flexibility to address both domestic and export markets. The company’s financial benchmarking shows higher margins and return ratios relative to most peers, underscoring its operational excellence.

Bottomline: Investment Levels and Target for Investors

BUY with conviction: Rs 3,000 target, upside potential >15%
Motilal Oswal’s BUY call is underpinned by Siemens Energy India’s sector leadership, robust financial outlook, and the transformative capex cycle in Indian T&D. Investors with a medium- to long-term horizon should consider accumulating the stock at current levels, with a target price of Rs 3,000 by September 2027. The risk-reward equation remains favorable, provided the company sustains its order momentum and executes on capacity expansions as planned.

Disclaimer:
Investors are advised to review all disclosures and consult their advisors before making investment decisions.