Prabhudas Lilladher recommended accumulate rating on Cummins India with a target price of Rs 841 in its research report dated May 24, 2019.
Prabhudas Lilladher's research report on Cummins India
Cummins India (KKC) reported Q4FY19 PAT of Rs1.4 bn which missed our expectations (PLe Rs1.8bn) due to lower EBITDA margin and higher tax rate during the quarter. Sales were up 9% YoY at Rs13.4 bn (PLe Rs14 bn) with domestic sales up 22% YoY and exports down 17% YoY at Rs3.2 bn. Domestically, the company grew faster than the overall market. KKC remains positive on the outlook for domestic sales as the underlying demand remains positive arising from sustained investments by the government in creating infrastructure for the Indian economy. The company has guided for domestic revenue growth of 10-15% YoY for FY20. KKC expects good growth in HHP segment mainly driven by data center, commercial realty, manufacturing etc. KKC is seeing weak demand from exports markets amid uncertain global growth and volatile forex markets. We have modelled 10%/11% Revenue/PAT CAGR over next two years (FY19-21E).
The stock is currently trading at 27/23x FY20/21E. We maintain our Accumulate rating on the stock with TP of Rs841 (26xFY21E).
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