Accumulate Cummins India; target Rs 460: Emkay
Brokerage house Emkay Global Financial Services is bullish on Cummins India and has recommended accumulate rating on the stock with a target price of Rs 460 in its September 24, 2013 research report.
October 07, 2013 / 12:32 IST
Emkay's research report on Cummins India
FY14E is a washout for Cummins with climax in earnings performance in Q2FY14E; FY15E has several positives Genset industry structure impeccable. Channel checks hints at retention of pricing discipline even in tough business environmentUnderlying fundamentals of Gensets revisited. Spares business remains on strong footing. Rupee depreciation is making stronger case for export businessBypass earnings trajectory & focus on capabilitiesWe believe long term growth for Gensets hinges on economic activity levels in the country and a power deficit scenario only aids in the terms of additional business volumes. We cite the example of US (largest market for Gensets) and Mumbai or Kolkata in India to drive this observation. Also, there exists a huge revenue potential driven by replacement market and demand for spares. Exports from Cummins are just 7% of global power gensets business reflecting huge upside and rupee depreciation makes the case even stronger."We choose to bypass short-term earnings performance and focus on underlying strength i.e. (1) strong entry barriers (2) consistency in FCF generation and (3) strong returns profile. Cummins is trading at a PER of 17X FY15E and 20% premium to Index valuations. We expect premium valuations to sustain as conviction on industry fundamentals is reinforced on interaction with indus try participants. We retain positive bias with ACCUMULATE Rating & price target of Rs 460/Share," says Emkay Global Financial Services research report.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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