Axis Securities's research report on Cummins India(1)Powergen (27% of revenues) is currently at 75%/ 60% of peak year (FY13) sales/ volume and bottomed-out in FY16. Industry to grow 10-15% in FY17, but competition is intensifying in High HP (>500 kVA) with recent entry of Kirloskar and re-entry of CAT. Cummins has dropped prices by 5-7% to defend its share;(2) Industrial segment (15% of revenues) has recovered in FY16 driven by mining & construction equipment and Rail;(3)Spares(23% of revenues)has also recovered on increased usage of mining & construction equipment (50% of spares);(4) Exports(35% of revenues) market to remain sluggish due to weak global growth and exchange control restrictions in Africa. Cumminsmight continue to face near-term headwinds on exports due to weak global macro, but long term trend continues to be positive on increased sourcing from parent. Higher margin domestic segment is showing signs of turnaround, but increase in competitive intensity might arrest expansion in margin.Our TP stands at Rs 1,005 (30x FY17E for standalone and Rs 45/sh for JV’s). For all recommendations, click here 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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