Prabhudas Lilladher's research report on Cummins India
Cummins India (KKC) reported strong revenue growth of 29% and EBITDA margins expansion of 309bps YoY to 16.9% (partly due to prudent cost management). KKC is witnessing strong Pre-buying traction, ahead of implementation of CPCB-IV norms from 1st Jul’23. Domestic demand remains strong from segments such as Data Center, Infrastructure, Hospitality, Hotels and Manufacturing. While on exports front management expects to continue its steady growth driven by new product launches and upgrading existing product across geographies. However, despite strong demand scenario, management has refrained from giving the guidance for FY24, owing to uncertainty arising from supply chain constraint and implementation of CPCB-IV norms (~80% of domestic Powergen business falls under CPCB-IV norms). We remain positive on Cummins given 1) product readiness for CPCB-IV norms, 2) continued momentum in exports market and 3) technology driven product launch (3.0 - fit to market product in exports market).
Outlook
We revise our estimates by 2.5% for FY25, on back of strong demand outlook and expected better margin from CPCB-IV products. The stock is trading at PE of 38.9x/33x FY24/25E. We maintain Accumulate rating on stock with revised TP of Rs1,750 (Rs1,708 earlier), valuing it at PE of 35x FY25E (same as earlier).
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