Sharekhan's research report on Cummins India
The company reported strong beat on Q4FY2024 consensus earnings estimates, with standalone revenue/operating profit/adjusted net profit growth of 20%/67%/76% y-o-y to Rs. 2,316 crore/Rs. 544 crore/Rs. 562 crore, respectively. Domestic sales grew 38% to Rs. 1,925 crore, driven by strong demand from data centres, commercial and residential real estate, manufacturing, and continued spending by the government on infrastructure.For FY2025, management has maintained its guidance of revenue growth of 2x of GDP. Moreover, with the sale of higher value CPCB IV gensets, margins will improve.
Outlook
We expect a 18%/22% CAGR in revenue/PAT (FY24-26E) and RoE/RoCE of ~28%/36%. Valuations at 40x FY2026E EPS might seem optically high but there is a huge growth tailwind supported of continued government spending on infrastructure. We maintain our buy on the stock with a revised PT of Rs 4,200, ascribing a multiple of 47x on FY26 earnings estimates.
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