Siemens Energy's Beijing Diplomacy Puts €154 Billion Backlog in Political Context

Siemens Energy joins German minister on China trip to seek fair competition. Record €154B backlog and raised guidance hinge on Gamesa's breakeven.

When Siemens Energy board member Tim Holt joins German Economy Minister Katherina Reiche on her first official trip to China from May 26 to 29, the agenda will go well beyond diplomatic pleasantries. The delegation — which also includes executives from BASF and Thyssenkrupp — is tasked with pressing for fairer competition and more resilient raw-material supply chains, issues that directly affect the energy equipment maker's sprawling infrastructure projects. For Siemens Energy, the timing is critical: the company is sitting on a record order backlog of €154 billion, and any disruption to market access or input costs could reshape the growth narrative that has driven its shares up more than 41% year-to-date.

The operational engine behind that backlog remains strong. In the second quarter, Siemens Energy booked €17.7 billion in new orders — a like-for-like surge of nearly 30% and a new record — while the book-to-bill ratio hit 1.72. Grid Technologies, the most profitable division with margins above 17%, and Gas Services, fueled by repeat orders from the United States, have been the primary drivers. The company responded by lifting its full-year guidance: comparable revenue growth is now expected at 14% to 16%, up from 11% to 13%, while the adjusted operating margin target was raised to a range of 10% to 12%. Free cash flow before taxes is forecast to roughly double to around €8 billion.

Yet the entire upgraded outlook comes with a single string attached: Siemens Gamesa, the struggling wind turbine subsidiary, must reach breakeven by year-end. In the second quarter, Gamesa posted a loss of €44 million — a sharp improvement from the €249 million loss a year earlier — and its margin clawed back from minus 9.2% to minus 1.7%. The offshore wind segment is expected to deliver the turnaround in the second half of the year, but management has made clear that the group's raised profit targets depend on it. Activist investor Ananym Capital is already calling for a spin-off of Gamesa, arguing that its losses are depressing the valuation of the otherwise thriving core business.

China itself represents both a vast opportunity and a persistent risk for Siemens Energy. The country is a key market for grid expansion, gas turbines and industrial electrification, but also a rival that has used subsidized pricing to undercut European manufacturers. Chancellor Friedrich Merz, during his visit to Beijing and Hangzhou in February, already flagged the need for de-risking and fair competition, and even stopped by a Siemens Energy facility in Hangzhou. Reiche's trip will put those principles into practice, focusing on raw materials, industrial inputs and potential dumping disadvantages. For a company whose long-cycle infrastructure projects depend on stable supply chains, the outcome of those talks may prove as consequential as any financial metric.

Analysts have taken note of the broader picture. Jefferies lifted its price target to €215 from €164 with a Buy rating, citing continued strength in order intake and gas turbines. JPMorgan followed with a target of €225 and an Overweight stance. Out of 25 analyst ratings, 19 are buys, giving a consensus target of €169. The stock closed on Friday at €173.48, down 1.15% on the day but still comfortably above that average.

The next major test for Siemens Energy will be its third-quarter earnings release on August 5. By then, the outcome of the China trip and the trajectory of Gamesa's offshore business will both be clearer. Until then, the group must navigate the tension between a booming order book and the political headwinds that could complicate its most ambitious growth targets.