Goldman Sachs Maintains Buy on Siemens Energy: Restructuring Could Boost Profit Margins

Overview

Goldman Sachs published a research report on Siemens Energy, maintaining a 'Buy' rating with a 12-month target price of €212. The report primarily discusses recent rumors regarding the company's potential spin-off of its 'Transformation of Industry' business. Goldman Sachs believes such a move would be highly aligned with corporate strategy, not only providing additional funds for shareholder returns but also effectively lifting the group's overall profit margin. Additionally, Goldman Sachs is optimistic about the support from long-term demand such as data centers and grid investments for the company's performance, and points out that the valuation discount compared to its leading peer provides a sufficient margin of safety.

Core views

Business spin-off expected to optimize margins and capital allocation: According to media reports, Siemens Energy is considering spinning off its Transformation of Industry (ToI) business. Data shows that this division generated revenue of €5.7 billion in FY2025, with an EBITA margin of approximately 11%, and holds an order backlog of €8 billion. Goldman Sachs believes divesting this segment with a relatively lower margin outlook would make the company's portfolio more focused and free up capital for value returns, thereby improving the group's overall profitability. Three core engines drive long-term high growth: The company's recent deliveries confirm strong fundamental tailwinds in the industry, including data center power demand, grid capex, and energy security needs. Goldman Sachs expects Gas Services' OEM volumes and aftermarket profitability to continue improving; Grid Technologies will maintain long-term revenue growth and margin expansion; and Siemens Gamesa's focus on offshore wind will also drive its margin improvement. Accelerating earnings and ample shareholder returns: Goldman Sachs forecasts that after FY2028, Siemens Energy's earnings will grow by over 60% by FY2030, with a substantial acceleration in free cash flow. Based on this, the company has the potential to return over €25 billion to shareholders by the end of the decade. Peer comparison highlights valuation recovery potential: According to Goldman Sachs' estimates, Siemens Energy's 2030E EV/EBITDA is only about 6 times. Since GE Vernova (GEV) went public, Siemens Energy has traded at a valuation discount. Based on two-year forward EV/EBITDA, the discount still stands at about 43% (while GEV's 2028E multiple is as high as 22 times). Goldman Sachs believes that this valuation gap should narrow further as the company's performance materializes and strategic restructuring progresses.

Analysis framework

Goldman Sachs' analysis follows a 'event catalyst + fundamental verification + relative valuation' framework. First, starting from recent spin-off rumors, it qualitatively judges the positive impact of restructuring on valuation by comparing the margin of the divested asset with the group level. Second, it translates macro-level power infrastructure tailwinds (data centers, grid) into specific financial metrics (volume, price, margin) for the company's three business segments to derive a medium-to-long-term earnings model. Finally, using sum-of-the-parts valuation combined with peer comparison, it quantifies the current pricing discount, forming a complete bullish logic chain.

Methodology notes

• Valuation MethodSOTP Sum-of-the-Parts Valuation

  SOTP Sum-of-the-Parts Valuation

  The report uses different valuation bases for different business segments of Siemens Energy. For example, it uses peer EV/EBITA multiples for Gas and Power, while applying a DCF model for Siemens Gamesa. This approach more accurately reflects the true value of diversified group businesses at different growth stages with different business models.

• Valuation MethodDCF Discounted Cash Flow

  DCF Discounted Cash Flow

  When valuing Siemens Gamesa, Goldman Sachs used an after-tax WACC of 7.2% for discounted cash flow. This reflects the institution's expectation of the business's long-term cash flow generation capacity, along with the matching cost of capital and risk premium.

• Event Game Theory & Behavioral FinanceExpectation Gap/Expectation Management

  Peer Valuation Discount Convergence

  By comparing Siemens Energy's forward EV/EBITDA multiple with that of its leading peer GE Vernova, the report highlights a significant discount of approximately 43%. The institution believes this valuation gap could narrow as the company's performance consistently materializes and restructuring progresses. This is a common investment strategy for finding valuation recovery opportunities through peer benchmarking.

Asset mapping & comparison

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

• Siemens Energy (ENR1n.DE)

  Core analysis target, benefiting from business restructuring and power infrastructure demand surge

  Strengths

  Strong demand for grid and gas services, significant cash flow acceleration potential, notable valuation discount vs peers

  Weaknesses

  Quality issues with some onshore wind turbines, relatively lower margin of the planned divestiture ToI business

  Comparison

  Approximately 43% discount vs GE Vernova (GEV) based on two-year forward EV/EBITDA

  Risks

  Poor quality management of wind turbines, intensified price competition, cost savings falling short of expectations, macroeconomic and currency headwinds

Key data

• 12-month Target Price€212Maintain Buy rating
• Transformation of Industry Revenue (FY 2025)€5.7 billionEBITA margin of 11%
• Transformation of Industry Order Backlog€8 billionBusiness to be spun off
• Long-term Earnings Growth ForecastOver 60%FY2028 to FY2030
• Capital Return PotentialOver €25 billionBy the end of the decade
• 2030E EV/EBITDAApprox. 6xGoldman Sachs estimate
• Valuation Discount vs GEVApprox. 43%Based on two-year forward EV/EBITDA
• Gas and Power Valuation Multiple22.2xBased on CY27E EV/EBITA
• Siemens Gamesa Discount Rate7.2%After-tax WACC

Impact & implications

If the spin-off proceeds smoothly, Siemens Energy will shed the lower-margin business segment, further focusing on high-margin grids and core gas services. Combined with the explosion in power infrastructure demand from AI data centers, the company could see a dual lift in both performance and valuation, with ample cash flow to continuously reward shareholders.

Risks

• Inability to satisfactorily resolve quality issues with specific onshore wind turbine models
• Intensified market competition and rising price pressure
• Failure to achieve targeted cost savings
• Weak macroeconomic environment
• Headwinds such as foreign exchange fluctuations and rising raw material costs

What to watch

• Official confirmation and subsequent progress on the spin-off of the Transformation of Industry (ToI) business
• Upcoming new medium-term guidance extending to FY2030 from the company
• Margin recovery progress of Siemens Gamesa in the offshore wind segment
• Actual pace of convergence of the valuation gap with peer GE Vernova