Buy Cummins; target of Rs 2100 : HDFC Securities

HDFC Securities' research report on Cummins

Cummins India Ltd (CIL) recorded the highest-ever revenue of INR 22b (+31%/+15% YoY/QoQ, in line with our estimate). This was driven mainly by strong pre-buy for CPCB 2 gensets. The deadline for the sale of these gensets has been extended until Jul’24 (an extension of six months). As a result, CPCB 4+ emission norms will now become effective from 1 Jul’24 for gensets with power up to 800kW (CIL has 20% of its portfolio above the 800kW rating). CIL, however, launched the CPCB 4+ compliant products in Jul’23 whose prices are 20-50% higher than their older counterpart. In terms of geographical performance, domestic sales have been very robust at INR 16.7bn (+43%/+20% YoY/QoQ). The export market is flattish with a certain part of the world slowing down (Europe, LatAm, APAC). The high HP segment in the export market is robust with 5%/18% YoY/QoQ growth. In CY24, CIL expects to ramp up its manned capacity, which is currently at a utilisation level of 100% as against its installed capacity utilisation of 60-65%. CIL has multiple tailwinds, namely, stringent emission norms, Capex cycle recovery, adoption of alternative fuels with lesser carbon footprint, revival in industrials and supporting manufacturing policies.

Outlook

We maintain BUY, with an increased SOTP of INR 2,100 (35x Jun-26 EPS).

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