ABB India, Siemens Post Profit Dip Amid High Valuations; L&T Shows Resilience in Q2

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AuthorSimar Singh|Published at:
ABB India, Siemens Post Profit Dip Amid High Valuations; L&T Shows Resilience in Q2
Overview

Leading engineering companies ABB India and Siemens reported a 7% dip in their consolidated net profits for the September 2025 quarter, despite revenue growth. ABB India's revenue rose 13.7% and Siemens' 16%, but higher costs and lower other income impacted profits. Both companies trade at very high P/E ratios, over 60 times. In contrast, domestic leader Larsen & Toubro saw its revenue grow 10.5% and net profit climb 14%, while trading at a more moderate P/E of 34 times. The sector anticipates strong growth from capital expenditure revival, but high valuations for MNC players raise concerns for investors.

Siemens India announced its September 2025 quarter results, reporting a 16% year-on-year increase in consolidated revenue from operations, reaching Rs 5,171 crore. The smart infrastructure segment showed strong growth of 20%. However, the company's consolidated net profit saw a nearly 7% decline to Rs 485.4 crore, primarily due to a lower 'other income' compared to the previous year, which had included a one-time gain from property. Siemens currently trades at a Price-to-Earnings (P/E) ratio exceeding 67 times and has a Return on Equity (RoE) of 11.8%.

ABB India also reported revenue growth of 13.7% year-on-year to Rs 3,310.7 crore for the same quarter, largely driven by its electrification division. Despite this revenue increase, ABB India's consolidated net profit declined by 7% to Rs 408.9 crore, attributed to higher costs, including raw materials. ABB India trades at a P/E ratio of 60 times and boasts a high RoE of 28.8%.

In contrast, homegrown leader Larsen & Toubro (L&T) posted a robust performance. Its consolidated revenue grew nearly 10.5% year-on-year to Rs 67,983.5 crore, with its energy projects division showing substantial growth. L&T's order inflow surged by 44.6% year-on-year to Rs 1.15 lakh crore. Managing cost pressures effectively, L&T's consolidated net profit grew by 14% to Rs 4,687 crore. L&T trades at a P/E ratio of 34 times and has an RoE of 16.6%.

Valuation Paradox:
The engineering sector is poised for growth driven by expected revival in private capital expenditure (capex) and continued government infrastructure programs. However, the valuations for leading MNC engineering companies like ABB India and Siemens are considered 'frothy' or significantly high, with P/E ratios well over 60 times. This contrasts with Larsen & Toubro's more reasonable valuation. Investors are weighing these high valuations against the sector's bright growth prospects, drawing parallels to investor Warren Buffett's emphasis on paying 'reasonable' valuations.

Stock Performance:
In late Monday trading, Siemens shares gained 4.6%, ABB India rose 1%, and L&T edged up 0.3%. All three stocks have seen significant corrections from their respective 52-week highs.

Impact:
This news is crucial for investors as it highlights a potential risk in highly valued MNC engineering stocks. While the sector outlook is positive due to anticipated capex and infrastructure spending, investors need to carefully consider if current stock prices adequately justify future growth, especially for companies with declining profits and very high P/E ratios. L&T's strong performance and relatively lower valuation present an alternative perspective.

Terms Explained:

  • MNC (Multinational Corporation): A company that operates in multiple countries.
  • Capex (Capital Expenditure): Funds used by a company to acquire, upgrade, and maintain physical assets like property, buildings, and equipment.
  • Dalal Street: A common term for the Indian stock market, analogous to Wall Street in the US.
  • P/E (Price-to-Earnings) Ratio: A valuation metric that compares a company's stock price to its earnings per share. A higher P/E suggests investors expect greater earnings growth in the future.
  • Consolidated Revenue: The total revenue of a parent company and all its subsidiaries combined.
  • y-o-y (Year-on-year): A method of comparing data from one period to the same period in the previous year.
  • Other Income: Income earned from sources outside a company's primary business operations, such as interest or investment gains.
  • Order Inflow: The total value of new orders a company secures within a specific period.
  • RoE (Return on Equity): A profitability ratio measuring how effectively a company uses shareholders' equity to generate profits.
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