Shares of Siemens Ltd. opened with gains of up to 3% on Tuesday, January 28, after global brokerage firm UBS upgraded the stock, citing favourable risk reward.

The foreign brokerage upgraded Siemens to ‘Buy’ from its earlier rating of ‘Neutral’. It has a price target of ₹8,000 on the stock, which implies a potential upside of 38% from Monday’s closing levels.

The brokerage wrote in its note that the markets are underappreciating the order and earnings resilience, as well as the expanding total addressable market.

The business mix is more diversified and resilient than its peers.

Consensus is not pricing in the potential of a strong global energy cycle.

UBS also sees higher exports from capacity expansion and the upcoming demerger.

The recent derating is more linked to muted government capex than concerns about orders and earnings.

The brokerage sees a favorable risk-reward, as the stock is trading closer to its five-year average valuation.

In an interaction last year in December, the management of the multi-national company said that private capex has not picked up meaningfully overall.

While private capex remains decent in the semiconductors and batteries, it remains slow in traditional technologies.

The management highlighted that the energy business is seeing a strong demand from the transmission segment due to a shift to the renewables segment and that the HVDC segment is expected to be a major growth driver going forward.

Siemens India’s digital industries business faced headwinds due to the semiconductor shortage and some levels of destocking led by the customers.

Out of the 26 analysts that have coverage on Siemens, 16 of those have a ‘Buy’ recommendation, five say ‘Hold’, while the remaining five have a ‘Sell’ rating on the stock.

Siemens shares are currently trading 1.33% higher at ₹5,864.60. On a year-to-date basis, the stock is down 12%.