Motilal Oswal is bearish on Cummins recommended sell rating on the stock with a target price of Rs 330 in its research report dated July 07, 2020.
Motilal Oswal 's research report on Cummins
The transition from CPCB-II to CPCB-IV (4th phase of emission standards proposed by Central Pollution Control Board) is touted to be beneficial for Cummins India, led by its access to technology as well as its first-mover advantage. On account of this transition, price hikes are likely to be >20% and may even be higher for certain categories. However, we note that: (a) technology access may not be as big a barrier to competitors (KOEL, Mahindra, and Perkins), (b) end markets may not be strong enough to absorb such steep price hikes (similar learning from the earlier transition from CPCB-I to CPCB-II), (c) the implementation date is set as July 2021, which may be pushed by six to nine months, especially given the COVID-19-led disruption.
We downgrade Cummins to Sell with lower TP of INR330 (from INR360) as we lower our target multiple to 15x from 16x earlier.
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