February 03, 2017 / 15:26 IST
Cummins India (KKC) posted robust Q3FY17 operational numbers driven by sustained strength in domestic market complemented by sharp exports uptick. Key highlights: 1) IT/datacenters & infra led to higher growth in domestic segment (power generation & industrial business unit); 2) after a decline arrest in past 2 quarters, exports improved 23% YoY leading to marginal guidance upgrade; and 3) KKC does not anticipate any material impact of higher duties in the US given limited exposure (<10% of exports).
OutlookOur conviction that KKC entails the best operating leverage (versus MNC peers) is further strengthened by Q3FY17 numbers. Maintain ‘BUY’ with target price of INR 1100 (28x FY19E EPS) given superior RoE and FCF of 26% and INR 5.6bn, respectively, by FY19E.
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