Motilal Oswal's research report on Cummins India
From our recent interaction with the management, Cummins India (KKC) appears to be well positioned to benefit from the change in emission norms for diesel gensets. The CPCB 4+ norms have been in effect since 1 st Jul’24. Contrary to expectations, demand has so far remained strong despite price hikes of 15-35% across nodes. This demand is being led by the refueling of channel inventory with CPCB 4+ gensets. KKC is striving to maintain high margins as experienced during the last few quarters through cost-rationalization measures and an improved product mix. The industrial segment is benefitting from the strong construction cycle, and the distribution segment is gaining from better market reach. Exports appear to have bottomed out and could witness improvement in the coming quarters.
Outlook
We thus maintain our positive stance on KKC and reiterate our BUY rating on the stock with an unchanged TP of INR4,300 (based on 45x P/E on two-year forward earnings).
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