Way2Wealth neutral on Cummins India
Way2Wealth has maintained neutral rating on Cummins India in its February 07, 2013 research report. According to the research firm, the company's domestic demand growth is expected to be in high teens for FY14 of which the power genset business is expected to grow by 15-20% led by changes in emission norms as well as volume driven growth.
February 07, 2013 / 17:16 IST
Way2Wealth has maintained neutral rating on Cummins India in its February 07, 2013 research report. According to the research firm, the company's domestic demand growth is expected to be in high teens for FY14 of which the power genset business is expected to grow by 15-20% led by changes in emission norms as well as volume driven growth.
"Cummins India, net sales for Q3FY13 have improved by 14% led by a 21%yoy growth in the domestic segment & ~5%yoy growth in the International segment. The power genset segment has grown by 50%yoy although qoq it has remained flat, the industrial business segment has shown a degrowth of 6% as well as the there is a degrowth in the auto segment to the tune of ~5%yoy whereas the distribution segment has shown a growth of ~15%yoy.Domestic demand has been driven mainly by power shortages in Southern India and rising demand from data centers and textile companies. The industrial segment demand has been affected due to poor demand from the mining segment which the management expects to bottom out going ahead. It also sees demand coming in from the compressors & the construction industry going ahead. Domestic demand growth is expected to be in high teens for FY14 of which the power genset business is expected to grow by 15-20% led by changes in emission norms as well as volume driven growth.International segment witnessed a degrowth of ~5% due to sluggish growth in the international market led by decline in exports of high HP engines. However the management is seeing signs of bottoming out with 5-10% growth in exports in FY14. It would be driven by 20- 25% growth in Low HP engines on commissioning of its new SEZ manufacturing facility with a capacity of 15-20k engines/annum to be ramped to 50k engines pa over next 2-3 years.Valuations: The power deficit woes are expected to stay strong in the near future, paving way for gensets demand with higher contribution flowing from its low HP engines segment. We retain our NEUTRAL rating as the stock seems to be fairly priced in at its CMP which trades at 18x FY14E EPS of Rs 29," says Way2Wealth research report.Institutional holding more than 40% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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 
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