Axis Direct's research report on Cummins India
Cummins' Q3FY17 PAT of Rs 2 bn (up 5%) beat our est of Rs 1.9 bn on higher exports (up 23%) and spares (up 18%). Management upped FY17 exports guidance to +5% (flat to -5% earlier); maintained domestic guidance at 10-12%. FY18 guidance: domestic +10%; exports +5%, margins volatility of 100-150 bps mostly downside due to competition.
OutlookMaintain FY17 EPS, but raise FY18 EPS to Rs 32 (Rs 31 earlier) to adjust for Q3 results. We raise our target PE to 25x (20x earlier) on better visibility in both exports and domestic markets. Raise TP to Rs 810 (vs. 630 earlier). We believe the management's strategy of introducing new models for exports as well as new platforms through CTIL impacts long-term growth outlook for CIL to 10-12% vs. 15-20% earlier.
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