Hold Cummins India target of Rs 796: Prabhudas Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Cummins India

Cummins India (KKC) reported strong performance in Q4, led by sequential recovery in economic activity. Revenue grew 18% YoY on account of robust growth in domestic market (up 26% YoY) led by continued traction witnessed in power generation, construction, mining and mineral segment. EBITDA margin expanded 710bps on account of strong revenue growth and better cost rationalization measures. Management indicated strong domestic demand for powergen segment with inventory levels in system being at all-time low. On exports markets front strong recovery is witnessed in China, North America and European region while Latin American, Africa and Middle East are expected to recover gradually in the coming quarter. In short run we remain cautious for both domestic and exports market on account of second wave of Covid. Given sharp rise in margins and improved visibility in export market, we have revised upwards our earnings estimate by 6.6%/6.9% for FY22E/23E. The stock is currently trading at 32.5x/29.1x FY22/FY23E.

Outlook

We maintain our Hold rating on stock with revised TP of Rs796 (earlier TP of Rs546). We believe 1) government push on infrastructure spend, 2) demand revival from exports market, 3) implementation of CPCB-IV norm and 4) opportunities arising from hydrogen technology augurs well for the stock there by increasing target multiple from 22x to 30x FY23E earnings estimates.

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