Sell Cummins India; target of Rs 751: CD Equisearch

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26 Aug, 2025 12:21

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CD Equisearch's research report on Cummins IndiaStymied by an excess provision of Rs 16 crs on account of mark down of some slow moving inventories, operating margins plummeted to 14.9% (- 250 bps yoy/-190 bps qoq), the lowest reading in at least eighteen quarters (see chart on the next page). As a result, operating profit skid 9.2% to Rs 171 crs, the first such drop in last five quarters. But that did not prevent operating profit to rise by 5.9% (yoy) in 9mFY16, all thanks to an astonishing 21.7% jump in operating profit in Q1. The stock currently trades at 32.0x FY16e EPS of Rs 26.51 and 29.4x FY17e EPS of Rs 28.87. Given sclerosis in earnings (4.5% growth in past 5 years& 8.9% projected for next fiscal) timidity in exports and fragile domestic economic recovery, the current valuation appear indefensibly high. We therefore retain our 'reduce' rating on the stock with revised target of Rs 751 (previous target: Rs 760) based on 26x FY17e earnings (a slight discount to 5 years avg. P/E of 28.5, given inadequate growth in earnings), over a period of 6-9 months. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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