Siemens Energy remains Overweight, target price raised to €144

Overview

This report focuses on the supply-demand dynamics of Siemens Energy AG within the global gas turbine and data center power infrastructure cycle. Morgan Stanley believes bottlenecks in AI data center construction include semiconductors, power, and labor, with "time to energization" continuing to drive demand for gas turbines and related power equipment. Although industry supply is expected to expand significantly before 2030, 2026 may still be a year of strong gas turbine order growth. Morgan Stanley therefore maintains its Overweight rating on Siemens Energy and raises the target price to €144.

Core views

The core view is that, in the near term, order growth and slot reservations will continue to support the share price. In the medium term, gas turbine supply and demand may become more balanced by 2030, but this should not simply be interpreted as an across-the-board oversupply. Longer-term risks are more concentrated in small- to medium-sized primary power solutions for data centers, as incremental capacity is concentrated in this area and pricing cracks could emerge first. As a scarce Power Infrastructure asset, Siemens Energy is supported by order backlogs in Gas Services and Grid Technologies, while improving losses in the wind business could also extend the equity story.

Analysis framework

The report combines a top-down industry supply-demand assessment with a company valuation framework. It first estimates changes in global supply of gas turbines, engines, fuel cells, and other technologies from 2025 to 2030, then compares these with gas turbine order demand, data center primary power demand, and regional order structures. It subsequently incorporates Siemens Energy's order backlog, margins, peer valuations, and DCF/SOTP valuation to derive the target price and risk-reward scenarios.

Methodology notes

• Valuation methodsSOTP + DCF

  Target price derived from the average of segment sum-of-the-parts valuation and DCF

  The €144 target price is the average of the 2028 SOTP valuation of €157 and the DCF valuation of €131; the DCF assumes an 8% WACC and a 2% perpetual growth rate.

• scenario_analysisBull/Base/Bear Case

  Bull-, base-, and bear-case valuation scenarios

  The bull-case target price is €168, the base-case target price is €144, and the bear-case target price is €75; the differences between scenarios are driven primarily by revenue CAGR, 2028 EBITA margin, and target multiples.

• forecastingMorgan Stanley ModelWare

  Forecasting data framework

  Unless otherwise stated, financial metrics are based on the Morgan Stanley ModelWare framework; consensus data comes from Refinitiv Estimates.

Asset mapping & comparison

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

• Siemens Energy AG (ENR1n.DE)

  Core covered name; rating maintained at Overweight and target price raised

  Strengths

  Strong gas turbine and grid equipment order backlogs, high visibility into 2026 order growth, scarce Power Infrastructure assets, and a continuing valuation discount to GE Vernova.

  Weaknesses

  The share price has risen significantly and is close to the target price, while orders may plateau in 2027; the wind business remains in a recovery phase.

  Comparison

  The report believes Siemens Energy offers greater order visibility than Wartsila and still trades at approximately half GE Vernova's multiple; relative to the European capital goods sector, it could command a premium due to greater visibility into EPS growth after 2028.

  Risks

  Supply catching up with demand before 2030, flat or declining new gas turbine pricing, Gas Services margins falling below 20% EBITA, project execution risks, and SGRE-related risks.

• GE Vernova

  Key peer and valuation reference

  Strengths

  Large gas turbine OEM with a higher valuation, supporting the case for a relative re-rating of Siemens Energy.

  Weaknesses

  Additional supply may compete in the data center primary power market.

  Comparison

  GE Vernova trades at 18.2x 2028 EV/EBITA and 26.6x PE, while Siemens Energy trades at approximately a 33% discount to GE Vernova on 2028 PE.

  Risks

  A turning point in gas turbine orders or pricing could affect expectations for the entire sector.

• Caterpillar / Wartsila / Baker Hughes / Doosan / Bloom / FTAI

  Competitors in small- and medium-sized primary power and alternative solutions

  Strengths

  Potential incremental supply in data center primary power, engines, fuel cells, or aero-engine conversion.

  Weaknesses

  Actual capacity available to U.S. data centers is limited for some companies, while supply chain and technology validation constraints remain.

  Comparison

  This incremental capacity is concentrated more in the small- to medium-sized power range and could create competitive pressure on data center primary power pricing first.

  Risks

  If orders fall short of expectations for incremental capacity, the companies involved could face pricing and utilization pressure.

Key data

• Target price change€130 -> €144Driven by an upward revision to outer-year margins, a re-rating of Grid Tech peers, and adjustments to DCF assumptions.
• Current share price€141.75The closing price disclosed in the report for January 23, 2026.
• 2025 gas turbine industry capacityApproximately 50GWMorgan Stanley estimates that the industry can currently produce approximately 50GW of gas turbines.
• 2025 new gas turbine ordersApproximately 88GWOrder levels were approximately 76% higher than current industry supply.
• 2026 expected order growth15%+ YoY, exceeding 100GWOrders remain the core KPI for Siemens Energy's stock in 2026.
• 2030 pure gas turbine supply90-104GWThe high end depends on Mitsubishi Heavy's additional capacity and factors such as Boom Supersonic.
• 2030 total supply of gas turbines plus alternative power solutionsApproximately 116GWIncludes alternative sources such as aero conversions, engines, and fuel cells.
• Siemens Energy backlog plus reservations78GWManagement stated that this had reached 78GW by the end of October 2025, up from 70GW at the end of September.
• 2028 base-case revenue CAGR12.1%Forecast organic revenue CAGR for 2024-2028.
• 2028 base-case EBITA margin16.0%Corresponds to a 2028 base-case EV/Sales multiple of 2.32x.
• 2028 bull-case EBITA€10.4bnCompared with €8.7bn in the base case.
• 2028 valuation multiples12.4x EV/EBITA, 17.8x PEClose to the European capital goods sector's 13x EV/EBITA and 17.9x PE, but still at a discount to GE Vernova.

Impact & implications

For investment implications, the report believes Siemens Energy remains in a consensus-upgrade cycle in the near term, with order backlogs, slot reservations, and demand for grid equipment providing visibility into revenue and EPS growth. The target price increase reflects higher outer-year margins and peer re-rating, but with the current price already close to the target, further upside depends more on continued order outperformance, sustained strength in Gas Services pricing, improvement in wind losses, and narrowing of the valuation discount to GE Vernova. Over the medium to long term, investors should monitor whether supply expansion before 2030 puts pressure on new equipment prices and Gas Services margins.

Risks

• Significant expansion in gas turbine and alternative power supply before 2030 could shift the market from tightness to balance or even localized oversupply.
• Capacity for small- to medium-sized gas turbines, engines, and fuel cells is concentrated on the data center primary power market, where pricing pressure could emerge first after 2026.
• New gas turbine order growth could slow, plateau, or fall below 2026 levels in 2027.
• If commentary on new Gas Services equipment pricing turns flat or weakens, expectations for margin expansion could be reduced.
• Execution risks related to large power generation projects and SGRE.
• Contract awards could be delayed by permitting approvals, policy, and geopolitical factors.
• A faster shift from coal power to renewables than from coal to gas could weaken gas turbine demand.
• Supply chain bottlenecks, particularly in critical components such as blades and guide vanes, could delay capacity expansion or increase costs.

What to watch

• GE Vernova 4Q25 results, scheduled for January 28, 2026.
• Siemens Energy FY1Q26 results, scheduled for February 12, 2026.
• Capital expenditure outlooks disclosed by hyperscale cloud providers during earnings season.
• The pace at which Siemens Energy's slot reservations convert into firm orders, particularly over the next 12-18 months.
• Whether 2026 gas turbine orders achieve year-on-year growth of more than 15% and exceed 100GW.
• Whether new gas turbine orders continue to grow or enter a plateau in 2027.
• Pricing changes and order allocation for small- and medium-sized data center primary power solutions.
• Whether Mitsubishi Heavy's plan to double capacity by 2030 is implemented.
• Whether outer-year margin estimates for Gas Services and Grid Technologies continue to be revised upward.