Siemens Share Price Fell 10%: What Led to the Sharp Decline?

On December 20, Siemens India Ltd. experienced a sharp 10% decline in its share price, marking its steepest drop in over six months. This came in the wake of the company’s management addressing concerns during their post-earnings call, where they provided insights into the state of private capital expenditure (capex) and operational challenges.

The management noted that while private capex remains steady in certain high-growth areas like semiconductors and batteries, it has been sluggish in traditional technologies. This uneven pace of investment appears to have dampened market sentiment.

Energy Business Highlights: A Bright Spot with Mixed Signals

Despite the challenges, Siemens India’s energy segment shows promise. Strong demand from the transmission sector is being driven by the shift towards renewable energy. The High Voltage Direct Current (HVDC) segment, particularly in Voltage Source Converter (VSC) technologies, is anticipated to be a key growth driver.

However, Siemens disclosed that it is refraining from participating in Line Commutated Converter (LCC) tenders, both in India and globally. Most of the company’s ongoing projects are based on LCC systems, leaving the less material VSC projects as future opportunities.

For context:

• LCC (Line Commutated Converter): A widely-used technology in HVDC systems to convert AC to DC and vice versa.
• VSC (Voltage Source Converter): A newer, more advanced technology with greater flexibility for HVDC applications.

Digital Industries Segment Faces Headwinds

Siemens India’s digital industries business has been grappling with supply chain challenges and changing customer behaviour. A global semiconductor shortage and customer-led destocking have significantly impacted the segment.

This has led to margin pressures, primarily due to:

• Pricing constraints.
• An unfavourable product mix.

Management remains optimistic, suggesting that the business could recover over the next few quarters as destocking eases.

Demerger 

Siemens management also discussed the upcoming demerger and listing of Siemens Energy, which is scheduled to be completed by 2025. On a positive note, the company expects its new orders for the fourth quarter to grow by an impressive 20.9% year-on-year.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.