Buy Cummins India; target of Rs 4300: Motilal Oswal

Motilal Oswal's research report on Cummins India

Cummins India’s (KKC) 2QFY25 results exceeded our and consensus estimates, with 31%/42%/37% YoY growth in revenue/EBITDA/PAT. Revenue growth was driven by strong YoY growth in the powergen, industrial and distribution segments, while exports remained weak. EBITDA margin expanded to 19.3%. Revenue growth improvement in powergen and industrial segments was far ahead of our estimates, driven by strong demand and price hikes. Export markets have been consistently improving QoQ for the last four quarters. We maintain our positive stance on KKC, led by: 1) its strong market positioning across segments, 2) positive underlying demand drivers, 3) the ability to sustain margins at higher levels, and 4) the ability to benefit from the fast-growing data center market. We fine tune our estimates and reiterate BUY on the stock with an unchanged TP of INR4,300.

Outlook

The stock is currently trading at 41x/35x on FY26E/FY27E EPS. We maintain our TP of INR4,300, based on 45x two-year forward EPS. Maintain BUY rating on the stock.