Siemens: Smart Infrastructure Segment Is an Enabler of the Energy Transition; Raising Valuation

We’re raising our fair value estimate for wide-moat Siemens by 10% to EUR 198 from EUR 180. Siemens' broad portfolio of equipment and software solutions used by building and utility end markets is an enabler of decarbonizing the power sector and buildings, which collectively contribute half of global greenhouse emissions. We assume 7% annualized EPS growth through 2028, which, given the group’s conglomerate status, comprising many other businesses beyond electrification, underperforms our preferred pick, Schneider Electric. Our revised fair value estimate implies a P/E multiple of 19 times on fiscal 2024 earnings, which we believe is appropriate given Siemens' robust outlook and competitive advantages. Shares screen as slightly undervalued, but we would recommend a greater margin of safety.