Planned TI deconsolidation could sharpen Siemens Energy's focus on electrification while creating scope for margin improvement and valuation rerating

Overview

The report analyzes the strategic implications of Siemens Energy's plan to separate the TI business legally and operationally and ultimately deconsolidate it. Deutsche Bank believes the transaction will allow the parent company to focus more closely on the electrification market, improve group margins and financial reporting comparability, and unlock TI's value potential through independent capital allocation, growth, and a sale of the business as a whole or by segment.

Core views

Siemens Energy has begun preparations for the legal and operational separation of its Transformation of Industry (TI) business, with plans to operate it as an independent entity while exploring various options, including bringing in external investors, a potential IPO, or a spin-off. The company aims to retain a minority stake following deconsolidation so that it can continue supporting TI's development. Deutsche Bank believes this decision will allow Siemens Energy to focus fully on the electrification market, eliminate the group's exposure to oil and gas and petrochemicals, and mechanically improve the group's medium-term margin by at least approximately 50 basis points. Its organizational structure and financial disclosures will also become simpler, and the group's business profile will more closely resemble GEV. On this basis, the report believes the significant valuation multiple gap between Siemens Energy and GEV could narrow, with the two companies trading at approximately 23x and 39x 2027E P/E, respectively. For TI itself, independent operations are expected to remove the constraints arising from competition with Siemens Energy's Gas and Grid businesses for capital expenditure and R&D resources. Deutsche Bank's base case forecasts that TI could generate €7.3bn in revenue and €1bn in adjusted EBITA in FY30, corresponding to a 13.8% margin and a valuation close to €12bn. Its value could rise further if new owners provide additional capital and drive higher profitability. The report's sensitivity analysis shows that every additional 1 percentage point increase in margin would add approximately €900m to TI's valuation. This indicates that the transaction's value depends not only on the separation itself but also on the intensity of investment and the margin trajectory following independence. TI generated €5.7bn in sales and an EBITA margin of 11.3% in FY25, with a target of achieving mid- to high-single-digit revenue growth and a margin of 12% to 14% by 2028. Its customers are primarily energy-intensive industries, whose needs include increasing asset output, electrifying operations, improving energy efficiency, and reducing carbon emissions. Its products and services cover oil and gas, chemicals, petrochemicals, mining, steel, pulp and paper, data centers, offshore and marine applications, as well as the production and transportation of green hydrogen and clean fuels. Its portfolio includes electrolyzers, industrial steam turbines and generators, turbine and reciprocating compressors, drive systems, batteries, fuel cells, digital solutions, and services. The service business focuses on extending equipment life and increasing availability, supported by an installed base of more than 85,000 steam turbines and compressors. TI is also expanding decarbonization technologies such as waste heat recovery, compressed-air energy storage, and specialized hydrogen and carbon dioxide compressors for CCUS. TI consists of four businesses with different business models and growth drivers. The compressors business generated FY25 revenue of €2.5bn and ranks second globally; industrial steam turbines and generators generated revenue of €1.7bn and rank first globally; electrification, automation, and digitalization solutions generated revenue of €1.4bn and rank second globally; and electrolyzers generated revenue of €0.2bn, rank first in PEM, and have more than 1GW of projects under execution or in operation. Deutsche Bank believes that, in addition to exiting TI as a whole, these businesses could also be sold separately or combined with other industry participants, and that segment-level disposals could unlock greater value. The group-level earnings model provides context for the Buy rating and EUR 210.00 target price. Deutsche Bank expects Siemens Energy's sales revenue to increase from €43.850bn in 2026 to €50.363bn in 2027 and €56.155bn in 2028. Over the same period, EBITDA is expected to be €6.491bn, €8.931bn, and €11.012bn, respectively; net income is forecast at €3.787bn, €5.415bn, and €6.856bn; and DB-adjusted EPS is projected at €4.70, €6.51, and €8.30. Free cash flow is expected to be €7.419bn, €5.142bn, and €6.100bn, respectively, while year-end net cash is forecast to rise from €8.728bn in 2026 to €11.176bn in 2028. Based on the report's model, DB-adjusted P/E for 2026 through 2028 is 31.7x, 22.8x, and 17.9x, respectively, reflecting the valuation multiple compression resulting from earnings growth.

Analysis framework

The report begins with the TI separation plan announced by the company and assesses the impact of deconsolidation on the parent company's business focus, margins, and valuation comparability with peers. It then develops an FY30 standalone operating and valuation scenario for TI based on revenue, EBITA, and margin assumptions and measures the sensitivity of valuation to changes in margins. Finally, the report breaks TI down into its four businesses to examine revenue, market position, competitors, and potential exit routes, and supports its overall conclusions with Siemens Energy's earnings, cash flow, and valuation forecasts for 2026 through 2028.

Methodology notes

• Valuation MethodPE/PEG valuation

  Forward P/E Peer Comparison

  The report compares Siemens Energy's and GEV's 2027E P/E multiples and considers the changes in Siemens Energy's own P/E from 2026 through 2028 to assess the potential valuation rerating arising from business simplification and earnings growth.

• Valuation MethodSOTP Valuation

  Analysis of TI's Whole-Business and Segment-Level Exit Value

  The report divides TI into four businesses and examines the possibilities of a sale as a whole, an IPO or spin-off, and separate sales or combinations with other participants to illustrate how different transaction structures could unlock different amounts of value.

• Valuation Method

  Margin Scenario and Valuation Sensitivity Analysis

  The report constructs a base case for TI using FY30 revenue and adjusted EBITA and estimates that every 1 percentage point increase in margin could add approximately €900m in value, illustrating the valuation impact of additional investment by new shareholders and improved profitability.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Siemens Energy (ENR1n.DE)

  TI's deconsolidation is expected to focus the group more closely on the electrification market and improve its medium-term margin, reporting structure, and valuation comparability.

  Strengths

  It has a portfolio spanning the energy conversion value chain, including conventional and renewable power generation, power transmission, energy storage, and electrolyzers, with service revenue accounting for approximately one-third of group revenue.

  Weaknesses

  Prior to the separation, it remains exposed to TI's oil and gas and petrochemical businesses, while TI's capital expenditure and R&D plans must compete with the Gas and Grid businesses for internal resources.

  Comparison

  The report states that its 2027E P/E is approximately 23x, below GEV's 39x; following deconsolidation, its business profile will more closely resemble GEV.

Key data

• Rating and Target PriceBuy; EUR 210.00Reference price was EUR 148.74 on August 24, 2026
• 52-Week Price RangeEUR 84.40–187.62Range stated in the report
• Impact on Group Medium-Term MarginAt least +50 basis pointsEstimated mechanical improvement from TI's deconsolidation
• 2027E P/E ComparisonSiemens Energy approximately 23x; GEV 39xUsed in the report to illustrate the valuation multiple gap between the two companies
• TI FY25 Operating DataSales of €5.7bn; EBITA margin of 11.3%Business baseline prior to separation
• TI 2028 TargetMid- to high-single-digit revenue growth; margin of 12%–14%TI management target
• TI FY30 Base-Case ForecastRevenue of €7.3bn; adjusted EBITA of €1bn; margin of 13.8%Deutsche Bank's current scenario
• TI ValuationClose to €12bnBased on Deutsche Bank's FY30 scenario
• TI Valuation SensitivityEach 1 percentage point increase in margin adds approximately €900m in valueReflects the potential impact of higher investment and profitability
• FY25 Revenue of TI's Four BusinessesCompressors €2.5bn; industrial steam turbines and generators €1.7bn; electrification, automation and digitalization solutions €1.4bn; electrolyzers €0.2bnThe four businesses have different business models and growth drivers
• Installed Equipment Base>85,000 unitsPrimarily steam turbines and compressors, forming the foundation of the service business
• Scale of PEM Electrolyzer Projects>1GWProjects under execution or in operation
• Group 2026E–2028E Sales Revenue€43.850bn, €50.363bn, €56.155bnDeutsche Bank forecasts
• Group 2026E–2028E EBITDA€6.491bn, €8.931bn, €11.012bnDeutsche Bank forecasts
• Group 2026E–2028E DB-Adjusted EPS€4.70, €6.51, €8.30Deutsche Bank forecasts
• Group 2026E–2028E DB-Adjusted P/E31.7x, 22.8x, 17.9xCalculated based on the report's price basis

Impact & implications

The report believes that TI's deconsolidation will shift Siemens Energy further away from a diversified portfolio encompassing oil and gas and petrochemicals and toward the electrification market. Removing TI would mechanically increase the group's medium-term margin, simplify its disclosure structure, and enhance comparability with GEV, thereby creating conditions for narrowing the valuation multiple gap. TI would gain greater independence in capital expenditure and R&D decisions; if new shareholders increase investment and improve margins, its value could exceed the base-case estimate of approximately €12bn. The significant differences among the four business models also make an exit as a whole, an IPO, a spin-off, or segment-level sales all viable options.

What to watch

• Monitor the pace of TI's legal and operational separation and whether the company ultimately chooses to bring in external investors, pursue an IPO, execute a spin-off, or adopt another transaction route.
• Monitor whether Siemens Energy retains a minority stake in TI and whether TI ultimately pursues an exit as a whole, segment-level sales, or combinations with other businesses.
• Monitor whether TI can achieve its target of mid- to high-single-digit revenue growth and a margin of 12% to 14% by 2028.
• Monitor whether capital expenditure and R&D investment following independence drive TI toward the FY30 scenario of €7.3bn in revenue, €1bn in adjusted EBITA, and a 13.8% margin.