Cummins India can test Rs 750: SP Tulsian

Cummins India can test Rs 750, says SP Tulsian of sptulsian.com.

Tulsian told CNBC-TV18, "There maybe fall of about 1.5-2% in the EBITDA margin of Cummins India, I think that is likely to get offset by the volume increase of the company. If I take FY11 performance of the company having posted an EPS of Rs 30 this has been a consistent performer with topline of close to about Rs 4,000 crore and if we take a call on FY12 earning the EPS of 30 is likely to get increase maybe to about 35-36, so that translates into a PE multiple of 15, very strong pedigree."

He further added, "Cummins is holding 51% stake, maybe 40-41% stake is held by the FII, mutual funds, so there is a very low public float and traditionally this stock has been ruling into a PE multiple of close to about 25. They have a strong business model, they are into the power generation, automotive business and the diesel and gas based generator sets are made by the company up to the capacity of 3,500 horsepower, so there is robust demand into the industrial segments, into the factories. So they have a strong order pipeline and they have always traditionally maintained their margin."

"So sometime when you see this kind of correction, which are witnessing now in this market then only you can really acquire this stock and if I think somebody can keep a view of about three-four months time the price of Rs 700 and in about 6-8 months can give a price of about Rs 750."

Disclosure: I have no personal holding in the above stock.