Cummins India Q1 PAT seen down 15% at Rs 150 cr

Cummins India, a manufacturer of diesel and natural gas engines, is set to declare its first quarter results today. Analysts on an average expect the profit after tax to go down by 15% year-on-year to Rs 150 crore in the quarter ended June 2012.

Total income is seen going up by 9% to Rs 1,138 crore and earnings before interest, tax, depreciation and amortisation (EBITDA) is likely to go up by 9% to Rs 202 crore during the same period. EBITDA margin is expected to be flat at 17.8% YoY. Expectations Analysts expect revenue growth to be led by export markets while domestic market growth is expected to remain lacklustre due to decline in industrial and auto segments. A strong demand in the southern India market due to severe power cuts is likely to help the company deliver volume growth of 7-8% for Q1FY13. Company also undertook price hike of around 2% in April 2012.  Cummins India’s peak margin in FY10 was 20%. The company has been witnessing significant headwinds to margins due to increasing competitive intensity with the entry of newer players. However, margins should hold on this quarter because of a favourable mix and 2% price hike in April 2012. Market conditions for the company remain challenging due to ongoing slowdown in industrial and construction activities. Investors should watch out for demand growth in the domestic market as tight liquidity conditions have resulted in slowdown, any slowdown in the export market as Caterpillar dealer sales declined 19% in May 2012 and management comment on sustainable operating margins & outlook for FY13.