Buy Cummins India; target of Rs 928: Prabhudas Lilladher

Prabhudas Lilladher's research report on Cummins India

Cummins’ (KKC’s) Q4FY18 performance was below expectations largely led by weak margins. Export sales were up 30% YoY, however, outlook on export markets remains volatile though some markets are seeing revival; timing of recovery remains uncertain in the near term. Domestic sales were down 5% YoY; however, KKC remains positive on the medium-to-long term outlook as the underlying demand conditions remain positive. The company has guided 8-10% growth in the domestic market and flattish for exports. While the competitive intensity remains high, KKC has been able to maintain/increase market share. We remain positive on KKC, given its strong domestic outlook, gradual likely revival of export markets and strong history of delivering on cost rationalization and healthy cash flows.

Outlook

We have reduced our earnings by 5% for both FY19 and FY20 to factor in lower margins and higher competitive intensity.  We maintain “BUY” with a revised TP of Rs928 (Previous - Rs967).