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Motilal Oswal Report
Domestic brokerage firm Motilal Oswal Financial Services has maintained its ‘Buy' rating on Cummins India Ltd., assigning a target price that implies a potential upside of over 17% from current levels, driven by company's key business segment, Powergen, which continues to benefit from strong industry tailwinds on both non-high horsepower and HHP sides.
The brokerage also highlighted a strong installed base, a wide product portfolio and higher geographical penetration continue to provide a stable stream of distribution revenue.
Industrial segment is growing selectively, while exports are stable across larger geographies with a little cautious approach toward the Middle Eastern markets.
Motilal Oswal expects overall Ebitda margin to remain strong on a healthy revenue mix despite higher raw material prices, which are currently passed through to clients.
The brokerage has maintained its estimates and retain Buy with an unchanged target price of Rs 6,600, based on an average P/E of 45x and DCF on Sep'28 estimates, which will capture long-term gains from high-growth segments.
Key risks and concerns
Key risks to brokerage's recommendation would come from lower-than-expected demand for key segments, higher commodity prices, intensified competition, and lower than-expected recovery in exports.
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