Buy Cummins India; target of Rs 1350: Firstcall

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  Firstcall Research's report on Cummins India
"The company’s Revenue for the quarter increased by 25.75% to Rs. 13143.10 million from Rs. 10451.40 million, when compared with the prior year period. Net profit stood at Rs. 2107.30 million in Q1 FY16 against Rs. 2119.90 million in the corresponding quarter ending of previous year. Reported earnings per share of the company stood at Rs. 7.60 a share during the quarter as against Rs. 7.65 over previous year period. Profit before interest, depreciation and tax is Rs. 2780.00 million as against Rs. 2865.70 million in the corresponding period of the previous year."

OUTLOOK AND CONCLUSION

At the current market price of Rs. 1189.45, the stock P/E ratio is at 38.93 x FY16E and 35.43 x FY17E respectively.

Earnings per share (EPS) of the company for the earnings for FY16E and FY17E are seen at Rs. 30.55 and Rs. 33.58 respectively.

Net Sales and PAT of the company are expected to grow at a CAGR of 4% and 5% over 2014 to 2017E respectively.

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On the basis of EV/EBITDA, the stock trades at 29.33 x for FY16E and 26.73 x for FY17E.

Price to Book Value of the stock is expected to be at 10.13 x and 9.11 x for FY16E and FY17E respectively.

"CUMMINS INDIA has no long term or short term debt, thus there is no interest burden. Power Generation business grew 23 percent over the previous quarter as company improved market share. The Industrial business was flat quarter on quarter, but has grown 22 percent based on improving government led infrastructure investments. The Company has recorded strong growth in export revenues particularly for low kVA generators. Domestic sales grew 17% as compared to the same period last year and 14% compared to the prior quarter. Exports increased 36% as compared to the same period last year and 16% compared to the prior quarter. The Company remains focused on improving its cost position as well as productivity. The investments in capacity, technology and talent position of the Company to deliver significant value and remain a dependable partner to its customers. Hence, we recommend ‘BUY’ in this particular scrip with a target price of Rs 1350 for Medium to Long term investment", says Firstcall Research Report.

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