Siemens shares are likely to remain in focus after global brokerage Jefferies downgraded the stock to ‘Hold’ from ‘Buy’, citing concerns around margin pressures and limited upside potential following the stock’s strong run-up.
The brokerage raised its target price to ₹4,000 from ₹3,800 but said the revised valuation implies only around 3% upside from the prevailing market price, leading to the rating downgrade.
According to Jefferies, Siemens recently restated its March quarter financials to reflect the sale of its low-voltage motors business. While demand trends remain healthy and order inflows continue to be robust, profitability has come under pressure due to rising commodity costs and currency depreciation.
The brokerage noted that Siemens’ gross margin declined 415 basis points year-on-year to 25.7% during the March quarter, while first-half FY26 gross margins were lower by around 400 basis points year-on-year. Management attributed the decline primarily to higher copper and silver prices as well as depreciation of the Indian rupee.
Although Siemens has initiated price hikes in its Smart Infrastructure and Digital Industries businesses, Jefferies believes the benefits may take several months to flow through due to customer contracts and execution timelines. As a result, the brokerage cut its FY26 EBITDA margin estimate to 9% from 12.3% earlier.
Jefferies also lowered its earnings estimates for Siemens. The brokerage reduced FY26-FY27 earnings per share forecasts by 23-34% to account for sustained margin pressures, while cautioning that further downgrades could follow if pricing actions fail to offset higher input costs.
Despite the margin concerns, Jefferies remains constructive on Siemens’ long-term demand outlook. The brokerage highlighted strong momentum in the Mobility and Smart Infrastructure segments, supported by railway modernisation, signalling projects, electrification initiatives and increasing investments in rolling stock.
Order inflows during the first half of FY26 rose 27% year-on-year, led by a 42% increase in the Mobility business. The company also delivered the first batch of locomotives under its large ₹263 billion locomotive contract and expects execution to ramp up over the coming quarters.
Jefferies further noted that Siemens continues to benefit from opportunities linked to metro projects, exports, industrial automation and data centre investments. The company is also evaluating capacity expansion initiatives to cater to growing demand across its end markets.
However, the brokerage believes earnings growth is now adequately reflected in the stock price. It expects Siemens to trade at a valuation premium to peers given its exposure to railways and infrastructure, but sees limited room for further re-rating at current levels.
Meanwhile, Siemens shares were trading around ₹3,880 at the time of the brokerage note, while the revised target price of ₹4,000 suggests only modest upside from current levels.
Disclaimer: The views and recommendations are those of Jefferies and do not represent the views of the publication. This article is for informational purposes only and should not be construed as investment advice.