Buy Cummins India; target of Rs 765: PLilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Cummins India

“Cummins India, management highlighted that LHP export is likely to be the key growth driver for the company. KKC globally has a very low market share in the LHP market. However, improving market share in the LHP market globally and strong demand from ME and Africa are likely to drive strong growth for LHP exports, given that India is the global feeder factory for LHP machines. KKC also highlighted that pricing in LHP export is healthy and not margin-dilutive. The company continues to explore new geographies and focus on strengthening exports portfolio. Apart from starting production from its dedicated export facility at the Megasite SEZ, KKC also launched a number of new offerings for global distributors like Telecom application product, Mobile genset, Gas product and Product range extension (140-175 kVA). As part of the initiative to add new geographies, KKC initiated their engine supplies to Latin America helping to diversify regional business risk.”

“We met the management of Cummins India (KKC). Key meeting highlights are 1) Increasing penetration of Cummins Inc. in LHP and strong demand from Middle East (ME) and Africa will continue to drive growth in exports 2) KKC has maintained that the LHP exports are not margin-dilutive 3) Company expects to double its sales in the next five years 4) Company also expects its domestic business to deliver 8- 10% CAGR and export business to deliver 15-20% CAGR over the next five years 5) New CPCB norms has helped narrow price differential between KKC and other players and 6) KKC continues to maintain that power shortage is not the key driver and 95% of sales go for backup power. Outlook for KKC continues to be positive, given the strong ramp-up in exports and likely improvement in market position, post changes in emission norms. Low capacity utilization of 50-60% also leaves upside surprise on margins once volumes improve. Maintain ‘BUY’.”

“The stock is trading at 21.4xFY16E earnings. We have upgraded our earnings by ~5% for FY15 to factor in revised guidance. KKC continues to be the best franchise in the Capital goods space. Outlook for KKC continues to be positive, given the strong ramp-up in exports and likely improvement in market position, post changes in emission norms. Low capitalization utilization of 50-60% also leaves upside surprise on margin once volumes improve,” says Prabhudas Lilladher research report.

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