The German engineering giant's Indian subsidiary, with a market capitalisation of ₹116,594 crores, witnessed a sequential revenue decline of 21.83% quarter-on-quarter, falling from ₹4,900.40 crores in Q2 FY26 to ₹3,830.70 crores in Q3 FY26. This volatility in top-line performance, coupled with compressed margins and a sharp 51.01% year-on-year decline in other income to ₹84.30 crores, painted a concerning picture of operational challenges facing the industrial automation and electrification specialist.
The company's standalone net profit for Q3 FY26 stood at ₹268.80 crores, down 26.01% year-on-year from ₹363.20 crores in the corresponding quarter last year. More alarmingly, the profit after tax margin contracted sharply to 7.02% from 10.81% in Q3 FY25, indicating significant pressure on profitability despite revenue growth.
Financial Performance: Revenue Growth Masks Profitability Concerns
Siemens Ltd.'s Q3 FY26 results revealed a troubling disconnect between top-line growth and bottom-line performance. Net sales of ₹3,830.70 crores represented a 14.01% year-on-year increase from ₹3,360.10 crores in Q3 FY25, suggesting continued demand for the company's industrial automation, digitalisation, and electrification solutions. However, this revenue expansion failed to translate into profit growth, primarily due to margin erosion and reduced non-operating income.
The operating profit excluding other income declined to ₹421.90 crores in Q3 FY26 from ₹386.60 crores in Q3 FY25, yielding an operating margin of just 11.01% compared to 11.51% a year earlier. This 50-basis-point contraction, whilst seemingly modest, reflects the intense competitive pressures and rising input costs plaguing the capital goods sector. Quarter-on-quarter, the deterioration was even more pronounced, with operating margins falling 143 basis points from 12.44% in Q2 FY26.
The gross profit margin compression told a similar story, declining to 11.13% in Q3 FY26 from 16.53% in Q3 FY25—a substantial 540-basis-point erosion. This suggests either adverse product mix shifts, pricing pressures, or elevated raw material and manufacturing costs that the company has been unable to pass through to customers. The PAT margin of 7.02% marked the lowest quarterly profitability in recent history, down sharply from 10.81% in the year-ago quarter.
| Metric | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 |
|---|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 3,830.70 | 4,900.40 | 4,346.80 | 4,259.00 | 3,360.10 | 4,457.00 |
| QoQ Growth | -21.83% | +12.74% | +2.06% | +26.75% | -24.61% | — |
| YoY Growth | +14.01% | +9.95% | +15.53% | — | — | — |
| Net Profit (₹ Cr) | 268.80 | 481.00 | 423.40 | 407.90 | 363.20 | 522.50 |
| QoQ Growth | -44.12% | +13.61% | +3.80% | +12.31% | -30.49% | — |
| YoY Growth | -26.01% | -7.94% | -3.11% | — | — | — |
| Operating Margin (Excl OI) % | 11.01% | 12.44% | 12.00% | 10.98% | 11.51% | 12.22% |
| PAT Margin % | 7.02% | 9.82% | 9.74% | 9.58% | 10.81% | 11.72% |
A significant contributor to the profit decline was the sharp fall in other income, which collapsed 51.01% year-on-year to ₹84.30 crores from ₹172.00 crores in Q3 FY25. This non-operating income stream, which typically includes treasury income, dividend income, and gains from investments, had been a meaningful contributor to overall profitability in previous quarters. Its sharp reduction in Q3 FY26 exposed the underlying operational weakness and placed greater pressure on core business margins to deliver results.
Employee costs rose 19.37% year-on-year to ₹468.40 crores in Q3 FY26 from ₹392.40 crores, outpacing revenue growth and suggesting either wage inflation pressures or increased headcount to support business expansion. The tax rate remained relatively stable at 24.26%, marginally below the 25.74% recorded in Q3 FY25, providing limited relief to the bottom line.
Operational Challenges: Lumpy Revenue Pattern and Margin Volatility
One of the most striking aspects of Siemens Ltd.'s recent performance has been the pronounced volatility in quarterly revenue and profitability. The company's Q3 FY26 net sales of ₹3,830.70 crores represented a steep 21.83% sequential decline from Q2 FY26's ₹4,900.40 crores, highlighting the lumpy nature of capital goods orders and project execution cycles that characterise the heavy electrical equipment industry.
This revenue volatility is not new for Siemens. Looking at the quarterly trend table, the company has experienced significant swings, with Q4 FY25 recording ₹4,259.00 crores in sales, followed by a sharp 24.61% decline to ₹3,360.10 crores in Q1 FY26 (Dec'24 quarter). Such fluctuations make it challenging for investors to assess underlying business momentum and raise questions about order book visibility and execution predictability.
Lumpy Revenue Pattern: A Structural Challenge
Siemens' quarterly revenue has fluctuated between ₹3,360 crores and ₹4,900 crores over the past six quarters, reflecting the project-driven nature of its business. This volatility complicates margin management, working capital planning, and capacity utilisation, ultimately impacting return ratios. The company's ability to secure a more stable order book and improve execution predictability will be critical for sustainable profitability improvement.
From a profitability standpoint, the company's return on equity (ROE) stood at 13.56% as of the latest period, which whilst positive, falls significantly short of the company's historical average of 12.97% and pales in comparison to sector leader CG Power & Industrial Solutions' impressive 85.95% ROE. This suggests that Siemens is generating relatively modest returns on shareholder capital despite its strong brand, technology leadership, and market position.
The company's return on capital employed (ROCE) of 25.78% for the latest period, down from an average of 30.37%, indicates declining efficiency in deploying capital to generate operating profits. Whilst still respectable by absolute standards, the downward trend is concerning and reflects the margin pressures and operational challenges the company faces in converting revenue growth into commensurate profit expansion.
On a positive note, Siemens maintains an exceptionally strong balance sheet with zero long-term debt and a net cash position, as evidenced by the negative net debt-to-equity ratio of -0.49. The company's shareholder funds stood at ₹15,356.70 crores as of September 2024, up from ₹13,087.10 crores a year earlier, reflecting retained earnings and prudent capital management. This financial strength provides a cushion to weather near-term operational challenges and invest in growth opportunities without leveraging the balance sheet.
Industry Context: Capital Goods Sector Headwinds
Siemens Ltd. operates in India's heavy electrical equipment sector, which serves critical infrastructure, industrial automation, power generation, transmission and distribution, and transportation markets. The sector has benefited from India's infrastructure investment push, industrial capacity expansion, and energy transition initiatives. However, it also faces intense competition, pricing pressures, commodity cost volatility, and execution risks inherent in large, complex projects.
The company's 14.01% year-on-year revenue growth in Q3 FY26 outpaced the broader heavy electrical equipment sector, which delivered a 6.77% return over the past year. However, Siemens' stock performance has lagged significantly, declining 3.90% over the past year compared to the sector's positive return, and underperforming the Sensex by 10.97 percentage points. This underperformance reflects investor concerns about margin sustainability, profitability trajectory, and valuation premium.
Looking at the competitive landscape, Siemens faces formidable rivals in ABB India Ltd., CG Power & Industrial Solutions Ltd., Hitachi Energy India Ltd., and Siemens Energy India Ltd., among others. Whilst Siemens commands the second-largest market capitalisation in the sector at ₹116,594 crores, its valuation multiples and profitability metrics lag several peers, raising questions about its competitive positioning.
| Company | Market Cap (₹ Cr) | P/E (TTM) | P/BV | ROE % | Debt/Equity |
|---|---|---|---|---|---|
| Siemens Ltd. | 116,594 | 63.07 | 8.55 | 13.56% | -0.72 |
| ABB India Ltd. | — | 69.73 | 17.12 | 18.02% | -0.72 |
| CG Power & Industrial | — | 95.53 | 14.25 | 85.95% | -0.17 |
| Hitachi Energy India | — | 110.86 | 21.34 | 12.00% | -1.00 |
| Siemens Energy India | — | 88.69 | 22.27 | 25.11% | -0.76 |
| BHEL | — | 114.03 | 3.81 | 1.63% | 0.12 |
Siemens' P/E ratio of 63.07x, whilst elevated, is actually the lowest amongst the peer group excluding BHEL, which trades at 114.03x despite a meagre 1.63% ROE. However, Siemens' ROE of 13.56% trails ABB India's 18.02% and is dwarfed by CG Power's exceptional 85.95%, suggesting that the company is not generating superior returns to justify even its relatively lower multiple within the peer set.
Valuation Analysis: Premium Pricing with Limited Justification
At the current market price of ₹3,177.20, Siemens Ltd. trades at a trailing twelve-month P/E ratio of 63.07x, representing a significant premium to the heavy electrical equipment sector average of 37x. The company's price-to-book value of 8.55x also reflects optimistic investor expectations, though it trails several peers who command even higher multiples on the back of superior profitability metrics.
The company's EV/EBITDA multiple of 53.13x and EV/EBIT of 61.75x are decidedly expensive, particularly given the recent deterioration in margins and profitability. The EV/Sales ratio of 6.14x suggests investors are paying a substantial premium for each rupee of revenue, which appears increasingly difficult to justify given the margin compression and profit decline witnessed in Q3 FY26.
The proprietary valuation assessment classifies Siemens as "VERY EXPENSIVE," a grade the stock has held since October 2020 with only brief interludes. This persistent premium valuation reflects the company's strong parentage (75% owned by Siemens AG, Germany), technology leadership, diversified product portfolio, and exposure to India's infrastructure and industrial growth themes. However, the recent profit decline and margin compression raise legitimate questions about whether this premium is sustainable.
The stock's PEG ratio of 1.60x, whilst not egregiously high, suggests limited value given the company's 5-year sales growth of 11.54% and EBIT growth of 18.56%. For a stock trading at 63x earnings with deteriorating near-term profitability, investors would typically demand either significantly higher growth prospects or a valuation correction to justify fresh investments at current levels.
The 52-week price range of ₹2,490.00 to ₹3,411.50 shows the stock currently trading 6.87% below its peak and 27.60% above its trough. The recent 3.71% decline following the Q3 FY26 results suggests the market is beginning to reassess the valuation premium in light of operational challenges, though the stock remains well above its 52-week low, indicating resilient investor sentiment anchored by the company's long-term fundamentals and market position.
Shareholding Pattern: Stable Promoter Base, Declining FII Interest
Siemens Ltd.'s shareholding pattern reflects a stable promoter base with 75.00% holding maintained consistently over the past five quarters. The promoter group, led by Siemens International Holding B.V. (52.78%) and Siemens Aktiengesellschaft, Germany (18.00%), provides strategic direction, technology transfer, and global best practices, which remain key strengths for the Indian subsidiary.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 | QoQ Change |
|---|---|---|---|---|---|---|
| Promoter Holding | 75.00% | 75.00% | 75.00% | 75.00% | 75.00% | 0.00% |
| FII Holding | 6.85% | 7.00% | 7.66% | 8.19% | 8.77% | -0.15% |
| Mutual Fund Holding | 3.55% | 3.69% | 3.73% | 3.93% | 3.47% | -0.14% |
| Insurance Holdings | 3.15% | 3.05% | 2.40% | 2.21% | 2.19% | +0.10% |
| Other DII Holdings | 1.66% | 1.30% | 1.12% | 1.15% | 1.12% | +0.36% |
| Non-Institutional | 9.79% | 9.96% | 10.08% | 9.52% | 9.45% | -0.17% |
However, a concerning trend has emerged in institutional shareholding patterns. Foreign Institutional Investors (FIIs) have been steadily reducing their stake, declining from 8.77% in December 2024 to 6.85% in December 2025—a cumulative reduction of 192 basis points over five quarters. The sequential quarter-on-quarter decline of 15 basis points from September to December 2025 suggests continued selling pressure from sophisticated global investors, likely reflecting concerns about valuation, profitability trajectory, and relative attractiveness compared to other opportunities.
Mutual fund holdings have similarly declined, falling from 3.93% in March 2025 to 3.55% in December 2025, with a 14-basis-point reduction in the latest quarter. This suggests domestic institutional investors are also trimming exposure, possibly reallocating capital to companies with stronger near-term earnings momentum or more attractive risk-reward profiles.
On a more positive note, insurance companies have marginally increased their stake to 3.15% from 3.05% in the previous quarter, and other domestic institutional investors (DIIs) have raised holdings by 36 basis points to 1.66%. These incremental additions, however, are insufficient to offset the larger reductions by FIIs and mutual funds, resulting in a net institutional selling trend that bears watching.
Stock Performance: Long-Term Winner, Near-Term Laggard
Siemens Ltd.'s stock performance presents a tale of two timelines. Over the long term, the stock has been a wealth creator, delivering stellar returns that have significantly outpaced broader market indices. However, near-term performance has been disappointing, with the stock underperforming both the Sensex and its sector peers over the past year.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | +2.48% | +1.59% | +0.89% |
| 1 Month | +1.57% | -1.74% | +3.31% |
| 3 Months | +3.01% | +0.32% | +2.69% |
| 6 Months | +3.03% | +3.77% | -0.74% |
| YTD | +3.72% | -1.92% | +5.64% |
| 1 Year | -3.90% | +7.07% | -10.97% |
| 2 Years | +28.29% | +15.78% | +12.51% |
| 3 Years | +75.75% | +38.13% | +37.62% |
| 5 Years | +194.49% | +64.75% | +129.74% |
| 10 Years | +422.12% | +239.52% | +182.60% |
The 10-year return of 422.12% represents exceptional wealth creation, outperforming the Sensex by a massive 182.60 percentage points. Similarly impressive are the 5-year returns of 194.49% (alpha of 129.74%) and 3-year returns of 75.75% (alpha of 37.62%), demonstrating the stock's ability to deliver superior risk-adjusted returns over meaningful investment horizons.
However, the near-term picture is far less encouraging. Over the past year, the stock has declined 3.90% whilst the Sensex gained 7.07%, resulting in negative alpha of 10.97 percentage points. This underperformance is even more pronounced when compared to the heavy electrical equipment sector, which delivered a positive 6.77% return over the same period, meaning Siemens underperformed its sector by 10.67 percentage points.
The stock's beta of 0.90 classifies it as a low-beta stock, suggesting lower volatility than the broader market. However, the one-year risk-adjusted return of -0.14 and volatility of 27.86% indicate that recent performance has been disappointing on both absolute and risk-adjusted bases. The negative Sharpe ratio further confirms that investors have not been adequately compensated for the risk undertaken over the past year.
Technical Analysis: Mildly Bearish Trend with Support Erosion
From a technical perspective, Siemens Ltd. is currently in a "MILDLY BEARISH" trend, having transitioned from a "BEARISH" classification on February 3, 2026, at ₹3,216. The stock trades above all key moving averages—5-day (₹3,173.87), 20-day (₹3,017.09), 50-day (₹3,111.94), 100-day (₹3,136.68), and 200-day (₹3,138.18)—which typically suggests underlying strength. However, the clustering of these moving averages around current price levels indicates consolidation and potential resistance zones.
Technical indicators present a mixed picture. The MACD remains bearish on both weekly and monthly timeframes, whilst the RSI shows no clear signal. Bollinger Bands indicate bullish conditions on the weekly chart but mildly bearish on the monthly chart, reflecting the stock's recent volatility and directional uncertainty. The On-Balance Volume (OBV) indicator remains bullish on both timeframes, suggesting accumulation despite price weakness, which could provide support.
Key technical levels to monitor include immediate support at the 52-week low of ₹2,490.00, which represents a 21.63% decline from current levels. Immediate resistance lies at the 20-day moving average area of ₹3,017.09, which the stock has recently breached. Major resistance zones exist at the 100-day (₹3,136.68) and 200-day (₹3,138.18) moving averages, whilst strong resistance is encountered at the 52-week high of ₹3,411.50, representing 7.37% upside from current levels.
Investment Thesis: Quality Company at Expensive Valuation
Siemens Ltd.'s investment thesis rests on several pillars: its status as a good-quality company with a strong parentage, zero debt, diversified product portfolio, exposure to India's infrastructure and industrial growth, and technology leadership in automation and digitalisation. The company's 5-year sales growth of 11.54% and EBIT growth of 18.56% demonstrate its ability to capitalise on India's economic expansion, whilst its average ROCE of 30.37% reflects efficient capital deployment over time.
However, several factors weigh against the investment case at current valuations. The company's "VERY EXPENSIVE" valuation grade, with a P/E of 63.07x and EV/EBITDA of 53.13x, leaves limited margin of safety. The recent profit decline of 54.86% year-on-year, margin compression, and "FLAT" financial trend classification raise concerns about near-term earnings trajectory. The "MILDLY BEARISH" technical trend and institutional selling by FIIs and mutual funds further dampen sentiment.
The proprietary Mojo Score of 42 out of 100 places the stock in "SELL" territory, down from a "HOLD" rating in late December 2025. This downgrade reflects the deteriorating near-term fundamentals, expensive valuation, and technical weakness. The score breakdown reveals mixed signals: good quality fundamentals offset by very expensive valuation, flat financial performance, and mildly bearish technicals.
KEY STRENGTHS
- Strong parentage with 75% ownership by Siemens AG, Germany, providing technology transfer and global best practices
- Zero debt balance sheet with net cash position, providing financial flexibility
- Diversified product portfolio across automation, electrification, digitalisation, and mobility
- Market leadership position as second-largest company in heavy electrical equipment sector
- Consistent long-term wealth creation with 422% returns over 10 years
- Strong average ROCE of 30.37% demonstrating efficient capital deployment
- No promoter pledging and stable promoter holding at 75%
KEY CONCERNS
- Consolidated net profit plunged 54.86% YoY in Q3 FY26 to ₹277.30 crores
- Operating margin contracted to 11.01% from 11.51% YoY, with PAT margin declining 379 bps to 7.02%
- Lumpy revenue pattern with 21.83% QoQ decline in Q3 FY26 sales
- Other income collapsed 51.01% YoY, exposing operational weakness
- Very expensive valuation at 63x P/E with limited justification given margin pressures
- FII and mutual fund holdings declining, indicating institutional selling pressure
- Stock underperformed sector by 10.67% and Sensex by 10.97% over past year
Outlook: What to Watch
The outlook for Siemens Ltd. hinges on several critical factors that will determine whether the company can stabilise margins, restore profitability growth, and justify its premium valuation. Investors should closely monitor quarterly execution, order book trends, margin trajectory, and management commentary on demand environment and competitive dynamics.
POSITIVE CATALYSTS
- Order book replenishment and improved visibility on project execution
- Margin stabilisation and recovery towards 12-14% operating margin range
- Revival in other income from treasury operations and investments
- Government infrastructure spending and industrial capex acceleration
- Energy transition opportunities in renewable energy and grid modernisation
RED FLAGS TO MONITOR
- Continued margin compression below 11% operating margin levels
- Further profit declines or inability to return to growth trajectory
- Persistent revenue lumpiness affecting predictability and working capital
- Sustained institutional selling by FIIs and mutual funds
- Valuation de-rating if earnings growth fails to justify 63x P/E multiple
The company's ability to navigate these challenges whilst maintaining its quality credentials and market leadership position will be critical. Given the current valuation premium and near-term headwinds, investors would be well-advised to adopt a cautious stance and await clearer signs of earnings stabilisation and margin recovery before committing fresh capital.
The Verdict: Exit Opportunity for Profit Booking
Mojo Score: 42/100
For Fresh Investors: Avoid initiating positions at current levels. The 63x P/E valuation offers limited margin of safety given the 55% profit decline, margin compression, and flat financial trend. Wait for valuation correction towards 45-50x P/E or clearer signs of earnings recovery before considering entry.
For Existing Holders: Consider booking profits, particularly for those sitting on substantial long-term gains. Whilst the company's long-term fundamentals remain intact, the near-term earnings trajectory is concerning, valuation is stretched, and technical indicators suggest further weakness. Redeploy capital to opportunities with better risk-reward profiles.
Fair Value Estimate: ₹2,650-2,850 (17-10% downside from current levels), implying a more reasonable 50-55x P/E multiple on normalised earnings of ₹50-55 per share.
Rationale: The SELL rating reflects the convergence of expensive valuation (63x P/E), deteriorating near-term fundamentals (55% profit decline, margin compression), flat financial trend, mildly bearish technicals, and institutional selling pressure. Whilst Siemens remains a quality company with strong parentage and long-term potential, current risk-reward is unfavourable for both fresh investors and existing holders who should use strength to book profits.
Note: ROCE = (EBIT - Other income) / (Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. The views expressed are based on data available as of February 6, 2026, and are subject to change based on market conditions and company-specific developments.
