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Prabhudas Lilladher Report
We met with the management of Cummins India Ltd. The management highlighted that demand scenario continues to remain strong in domestic market with continued sales of CPCB-II (time extended till June 2024) and CPCB-IV variant products from regions like NCR. However, in exports market demand remains healthy only in selected geographies.
The imported components of CPCB-IV variant product will be localised and accordingly aid in improved product margins.
Management maintained its guidance of two times gross domestic product growth over next couple of years (double digit sales growth in FY24) and guidance of 100 basis points improvement in margins, given sharp focus on cost management.
Cummins' outlook remains intact given-
strong domestic demand in power gen across sectors,
improving margin profile, and
ample room for growth in the distribution business.
We estimate FY23-25E revenue/profit after tax compound annual growth rate of 12%/11.4%. The stock is trading at price-to-earning of 38.1 times/33.8 times FY24/25E.
Maintain ‘Hold' rating on stock with target price of Rs 1,788 (same as earlier), valuing it at 35 times on FY25E EPS (same as earlier).
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