Cummins India drew a target-price cut from Jefferies after commodity costs weighed on June-quarter margins, prompting the brokerage to lower its earnings estimates. Jefferies, however, retained its Buy rating as it expects price increases and growth from data centres to support margins ahead, while Citi and HSBC also maintained their positive ratings. JPMorgan stayed Neutral and questioned whether the company's period of elevated margins has run its course.
The quarter showed a sharp divergence between revenue growth and profitability. Revenue exceeded estimates, helped by domestic demand growth of more than 22%, while exports remained flat. However, higher commodity costs and supply-chain issues pushed gross margin to its lowest level in 13-14 quarters, weighing on EBITDA and adjusted profit.
Management expects commodity cost inflation to persist. Gross margin fell to 33.5% from 37% in Q1FY26, while the material cost ratio increased to 66.5% of revenue from 63%.
Cummins India Q1 Highlights
- Revenue stood at Rs. 3,426 crore, beating the Rs. 3,217 crore estimate by 6.5%.
- EBITDA stood at Rs. 617 crore, 7% below the Rs. 663 crore estimate.
- EBITDA margin was 18%, missing the 20.7% estimate by 270 basis points.
- Adjusted profit stood at Rs. 543 crore, 9% below the Rs. 597 crore estimate.
- Domestic demand grew more than 22%, while exports remained flat.
The margin pressure was primarily driven by commodity cost inflation. Management expects the pressure from commodity costs to continue, while supply-chain issues also affected profitability during the quarter.
Separately, Shveta Arya resigned as managing director effective Aug. 31, 2026, citing "external opportunities". She was appointed in September 2024 for a three-year tenure. No interim appointment has been announced yet, adding leadership uncertainty.
Here's what brokerages are saying after Cummins India announced Q1 results:
Jefferies
- Maintained 'Buy'; Cut Target Price To Rs. 6,700 From Rs. 7,100
- Commodity prices affected profitability during the quarter.
- Cummins India has taken price increases, which Jefferies expects to support a recovery in margins.
- Data centres remain an additional growth driver for the company.
- Cut FY27-FY29 EPS estimates by 6-7%.
- Distribution, data centres and indigenisation remain key margin drivers.
JPMorgan
- Maintained 'Neutral'; Target Price At Rs. 5,882
- Flagged weak margins despite the company's relatively low exposure to commodities such as copper and silver.
- Said the key question is whether Q1FY27 marks the end of the period of elevated margins.
Citi
- Maintained 'Buy'; Target Price At Rs. 6,700
- Said the impact of commodity headwinds and the lag in passing through higher costs was greater than expected.
- Awaits clarity on whether there were any one-off expenditures during the quarter.
HSBC
- Maintained 'Buy'; Target Price At Rs. 6,500
- Management pointed to steady business momentum across key markets.
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