Though Siemens posted a top line growth of 69 per cent y-o-y to Rs 1,782 crore in the June 2007 quarter, its operating profit growth was disappointing at 15 per cent.

If it weren’t for profit on sale of investments of Rs 26 crore, the net profit growth of 45 per cent, would have been much lower.

Siemens’ power business, which is its largest (nearly 52 per cent of total revenues) and fastest growing (113 per cent y-o-y) segment, made lower profits. The company has attributed lower profitability to provisioning for anticipated losses in some power projects.

Analysts also add that as the company is operating at full capacity, Siemens had to rely on higher outsourcing, which lowered the margin.

As a consequence, its margin in the power segment declined 540 basis points to 0.55 per cent. The performance of its other divisions was good with strong sales growth as well as margin improvement.

Siemens’ operating profit margin declined nearly 250 basis points y-o-y to 5.08 per cent in the June 2007 quarter. Even in the March and December quarters, its operating margin had declined 285 basis points y-o-y and 165 basis points respectively due to cost pressures.

The company has a pending order book of Rs 10,816 crore, up 40 per cent y-o-y and unchanged sequentially. At its current price, the stock trades at 28 times estimated FY09 (September year end) earnings. The stock is unlikely to be an outperformer until its new capacities come up, which is expected over the next two-three quarters.