Siemens Energy India Q3 FY26 beat lifts transmission growth and margin outlook

Investment View and Valuation

Motilal Oswal Financial Services retained its Buy rating on Siemens Energy India after 3Q FY26 results exceeded its estimates across revenue, EBITDA and PAT. The broker raised its target price to Rs 4,100 from Rs 3,950, valuing the stock at 55 times September 2028E earnings. At the report's CMP of Rs 3,252, the target implied 26 per cent upside.

Motilal Oswal marginally revised its FY26, FY27 and FY28 estimates by positive 7 per cent, negative 1 per cent and negative 1 per cent respectively, incorporating the 9M FY26 performance.

3Q FY26 Financial Performance

Siemens Energy India's 3Q FY26 performance exceeded Motilal Oswal's estimates across key financial metrics. Revenue rose 39 per cent year on year to Rs 2,490 crore, while gross margin expanded 340 basis points year on year to 45.1 per cent. EBITDA increased 72 per cent to Rs 590 crore, and PAT grew 68 per cent to Rs 440 crore.

For 9M FY26, revenue, EBITDA and PAT were Rs 6,800 crore, Rs 1,540 crore and Rs 1,180 crore respectively, up 31 per cent, 49 per cent and 59 per cent year on year. EBITDA margin increased 270 basis points to 22.7 per cent.

Power Transmission: Primary Growth Driver

The power transmission business remained the main growth driver. Its 3Q FY26 revenue grew 42 per cent year on year to Rs 1,390 crore, broadly in line with estimates, while EBIT margin of 21.6 per cent was above Motilal Oswal's expectations.

The segment's order backlog rose 28 per cent year on year to Rs 13,500 crore, with implied order inflows up 37 per cent to about Rs 2,400 crore. Important 9M FY26 wins included 420 kV GIS products and a substation for a major solar park, a plus or minus 300 MVAr STATCOM project in southern India, and a 400 kV GIS substation in western India.

The broker expects transmission growth to be supported by capacity expansion, domestic and export inflows, renewable-energy evacuation investment and data-centre-led grid demand. It estimates a 13 per cent order-inflow CAGR and a 37 per cent revenue CAGR for the segment over FY25 to FY28E.

Power Generation: Strong Margins Despite Lower Backlog

Power generation revenue increased 36 per cent year on year to Rs 1,100 crore, 10 per cent above estimate. EBIT margin of 22.3 per cent materially exceeded the 15.2 per cent estimate.

However, the power-generation backlog declined 3 per cent year on year to Rs 5,800 crore because of lower inflows and strong execution. The broker identifies industrial capex recovery, refurbishment of the installed turbine fleet and improving private-sector capex as the segment's key future drivers.

Motilal Oswal forecasts a 7 per cent order-inflow CAGR and a 10 per cent revenue CAGR for power generation over FY25 to FY28E. It expects EBIT margins of 21 per cent in FY26E and 18 per cent in both FY27E and FY28E.

Growth Opportunities and Financial Outlook

Motilal Oswal expects Siemens Energy India to benefit from domestic and export opportunities in renewables, data centres and steam turbines. The company is pursuing long-term opportunities in transmission build-out, including renewable integration, HVDC and grid-stability solutions; improving the efficiency and life of India's ageing thermal fleet; and emerging decarbonisation technologies.

• Green hydrogen
• Long-duration energy storage
• CCUS
• Coal gasification

The broker forecasts FY25 to FY28E revenue, EBITDA and PAT CAGRs of 26 per cent, 32 per cent and 34 per cent respectively. EBITDA margins are forecast at 22.5 per cent, 22.0 per cent and 22.3 per cent over FY26E to FY28E.

Key Risks

• A slowdown in ordering.
• Supply-chain issues.
• A sharp rise in commodity prices that could pressure margins.