Buy Cummins India; target Rs 570: Motilal Oswal
Brokerage house Motilal Oswal is bullish on Cummins India and has recommended buy rating on the stock with a price target of Rs 570, in its research report dated July 03, 2013.
July 04, 2013 / 14:34 IST
Motilal Oswal's research report on Cummins India
"Cummins group facilities have been commissioned at the Megasite, while LHP manufacturing facility / HHP rebuild centre in SEZ will be commissioned in 2013. These have opened up interesting growth avenues in terms of components exports and increased distribution revenues. Commissioning of LHP exports facility in early 2013 is again important as this could potentially become an INR10b business opportunity (v/s INR3.9b in FY13); while commissioning of the HHP rebuild centre in the SEZ in end 2013 will enable reconditioning of Cummins gensets in other regions.""Distribution business: emerging opportunities, strengthening channels: During FY13, new line was added in the Consumer Business sector by offering automotive, industrial and power generation batteries, which also supported growth. Three new training facilities - the Global Training Center at Greater Noida, the Comprehensive Technical Training facility in Pune and the Chhindwara Center of Excellence in Madhya Pradesh has been opened during FY13 and the management expects additional revenue and profitability through improved customer support and enhanced technical capabilities.""Exports: New geographies / New products / Components: During FY13, KKC identified new business opportunities for Heavy Duty and High Horsepower Engines and Parts exports. The company started export of components to various engine manufacturing facilities and after markets across regions. This helped compensate part of the loss in revenue due to decline in volumes in global engine demand. To add new geographies, KKC supplied its first engines to Latin America which will help consolidate and diversify regional business risk."Valuation and view: "We model EBITDA margins at 18.3 percent in FY14E/18.7 percent in FY15E (v/s 16.8 percent in 4QFY13), and expect KKC to report an EPS of INR25.3 in FY14E/ INR29.3 in FY15E. Post 4Q results, the stock has corrected by ~13 percent and we believe that this provides an opportunity to accumulate. Maintain Buy," says Motilal Oswal research eport.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. 
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