Siemens Has Carved Itself a Wide Moat, Shares Appear Undervalued to Our Revised Valuation

We raise our fair value estimate for Siemens to EUR 166 from EUR 160 after taking a fresh look at the business, which also sees us raising our economic moat rating to wide. The spinoffs of its cyclical energy and wind turbine divisions in 2020, combined with an increasing mix of revenue generated from its formidable industrial software offering, have improved the quality of the group and provide more durable returns than in the past. Shares are trading in undervalued territory and at a larger discount than its European capital goods peers, despite its superior market outlook. We believe the market is overstating the perceived cyclicality of the business and its strongly competitive advantaged business units, which warrant a higher multiple than its current 14 times forward P/E ratio.