Siemens is a provider of industry and infrastructure solutions with operations in three core business areas — energy, healthcare and automation. Besides, the company also makes small light bulbs, lighting for stadiums and railway electrical and controls such as safety relays. It also plans to build metro coaches.
The company has not seen its topline growing much since it has been in the range of 9,200 to 9,600 crore over the past three years. However, operating profit margin has expanded during this period by almost 300 bps to 14.5% in FY10 on account of profit generated by the power transmission business. For the year ended September 2010, Siemens received fresh orders worth 12,430.4 crore, a jump of 41% from the year ago. However, execution still remains a problem as sales growth has been much lower during this period. Though the company stands to gain from industrial recovery and increased government focus on power in the forthcoming Five Year plans, the company's slow execution might restrict its profit growth. At 30 times its earnings for the 12-month period ended September 2010, the stock looks expensive compared to peers such as Crompton Greaves, which is trading at a consolidated P/E of 19. Investors can wait for the scrip to correct further before buying it.
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