Way2Wealth neutral on Cummins India

8707 Investors following Cummins. Share this News with them.

0

Like this story, share it with millions of investors on M3

Way2Wealth neutral on Cummins India

Way2Wealth has maintained neutral rating on Cummins India with a target of Rs 612, in its August 6, 2011 research report.

Post your opinion here

 

0

Tweet

Share on Tumblr

RELATED NEWS Accumulate Ipca Labs; target of Rs 369: Sushil Finance Buy Divis Labs; target of Rs 927: Emkay Hold Hero Motocorp; target of Rs 1911: KRChoksey ALSO READ See previous views by Way2Wealth See what other Experts & Brokerages are saying about Cummins See messages about Cummins Cummins BSE | NSE 01/06/12 Are Mutual Funds betting on Cummins?

Way2Wealth has maintained neutral rating on Cummins India with a target of Rs 612, in its August 6, 2011 research report.

"Cummins India, in its conference call For FY12, the management has indicated a sign of caution with a growth of 10-15% for FY12 citing adverse market conditions, reduced liquidity in the market, interest rate hikes & critical international conditions. Net sales have showed an upside of 12% due to slower offtake in the domestic market which has delivered a sales growth of 8%yoy whereas the international market has grown by 26%yoy. More sales have been for its Midsize engines rather than its HHP engines which are at lower margins as compared to HHP engines. Sharp increase in operating expenses have been witnessed due to higher purchase of outsourced goods from its Tata Cummins JV & higher employee cost which is due to a one time wage settlement for shop floor workers at Kothrud & due to increased hiring which is expected to level off in FY12."

"Operating profits have been affected by a negative 6%, due to incremental commodity prices which has shrunk its margins from 21.7% to 18.2%yoy. Interest cost has not seen any kind of jump as well as no incremental depreciation cost as there has been no capex deployed this qtr. Adjusted PAT has shown a flat growth with reduced margins at 13.81% but management has indicated that for FY12, it will have sustainable margins at 15.81%, which we remain very much skeptical about."

"Reeling under pressure of bad macro economy & shrinking market conditions, we believe that Cummins will face difficult times going ahead for this fiscal. At the CMP of Rs 615, the stock discounts 18x its FY13E and 15x FY14E earnings of Rs34 and Rs40 respectively. We give a NEUTRAL rating as the stock seems to be fairly priced in with a target price of Rs.612 per share based on a PE of 18x FY13E EPS of Rs 34 per share," says Way2Wealth research report.

Institutional holding more than 40% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment