Siemens-Gamesa: from Maintain to Overweight, O.P. 16.43 eur

Siemens Gamesa in the USSiemens Gamesa in the US

Ángel Pérez Llamazares (Renta 4) | In Q219 results we saw how Siemens-Gamesa (SGRE) secured a portfolio in maximums of 23.6 M€, offering elevated medium term visibility, and allowing the lower limited of sales guidance to be covered 100%.

Book-to-bill ration LTM at 1.2X suggests continuity in volume growth, reinforced be elevated client demand, which in some cases is generating order waiting lists (sectoral). However, price pressure remains on onshore business, which we expect to remain over the long term, pushing the EBIT margin below 9% until 2025 according to our calculations. Despite that, we cannot rule out possible improvements in the margin in the medium/large term to the extent that new efficiencies are created, as well as the good perspectives for growth in offshore business (GWEC estimates TACC 2018-2025 +20%), where competition is weak.

Guidance for 2019: sales 10-11 Bn€, marginal EBIT 7%-8.5%. R4 estimate medium range. We expect growth around 20% in sales of MW, with prices ceding around -3%. We expect that this fall in prices will be compensated by efficiency savings and synergies, as well as from the positive evolution foreseen in Services, where we expect high single digit in the maintenance fleet. This positive evolution, together a strategy for the control of floating assets, and expectations of moderate investment, will allow it to continue improving the net treasury position. We do not, for now, consider the impact of the trade war significant, as the company is protected by the sales contracts. 

Investment rating, significant advantage compared to competitors.

Being the leading company in aerogenerators is a significant factor in reaching an investment rating with S&P BBB- (positive), Moody’s Baa3 (stable) and Fitch a level above BBB (stable). An important advantage compared to competitors when approaching new projects.

We lift our Objective Price to 16.43 euros (before 15 euros),and we raise the recommendation to Overweight (before Maintain).