JPM | Industrial Spec Sales: Siemens Energy - Buy the Weakness - for a start it‘s about half the price of GEV

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JPM | Industrial Spec Sales: Siemens Energy - Buy the Weakness - for a start it‘s about half the price of GEV

rivatives). The company has, however, repeatedly mentioned efficiency gains driving

incremental output at its factories beyond that level, so whilst this data point is new, it is not entirely unexpected, in our view. It

has, however, stoked a renewed debate of potential over-supply at some point towards the end of the decade. To frame this, in

FY24, we estimate there was c50GW of total supply available (globally) versus orders of c57GW across the major players

globally. In FY25, we estimate c55GW of supply in a market calling for 100GW. In FY26, best case, we would estimate c64GW

of supply, in a market trending to 115-120GW based on what we see in today’s GEV results. In FY27, supply may approach

70GW, in a market likely ordering 110-120GW, and in FY28, we estimate c80GW of supply in a market of 110-120GW, etc.

Come FY30, we envisage a scenario of 90GW+ (perhaps 95GW+ including the new GEV additions), and while supply and

demand would be much closer to being in balance, we foresee backlogs extending rather than contracting in FY27 and FY28, and

a still strong pricing environment – by which time, the OE side of the investment case would be c10% or less and would be

comfortably overshadowed by the embedded value of the installed base.

2. Order Mix: Of the 20GW of new gas turbine orders in the quarter for GEV, 18GW are slot reservation agreements and 2GW

are new firm orders, with the over-simplified inference being that these are not particularly firm orders. That's the wrong way to

think about it, in our view. First, GEV and ENR have different strategies regarding pursuing slots versus firm orders – with ENR