Buy Cummins; target of Rs 1818: HDFC Securities

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26 Aug, 2025 12:21

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Cummins India Ltd (CIL) delivered a positive surprise with the highest quarterly revenue/EBITDA/PAT at INR 21.8/4.1/3.6bn, beating our estimates by 12/37/34%. Revenue outperformance, pricing action and op-lev resulted in gross and EBITDA margin expansion. CIL maintained its guidance of the returning to historical gross margin range of 35-36% (+300bps) in 18-24months. The demand environment is strong in both domestic and export markets, and CIL expects to grow at 2x the Indian GDP growth. With the transition to stringent CPCB 4+ norms expected to take place in July’23, powergen pre-buying is expected to pick up in Q4FY23/ Q1FY24. CIL has multiple tailwinds, namely, stringent upcoming norms, Capex cycle recovery, adoption of alternative fuels with lesser carbon footprint, revival in industrials and supporting manufacturing policies. CIL highlighted that it continues to evaluate on CTIL merger and will arrive at a solution which is in the best interest of various stakeholders.

We have increased our FY23/24/25 EPS by 7.4/3.7/9.8% to factor in strong growth. Maintain BUY, with an increased SOTP of INR 1,818 (35x Dec-FY24E EPS).

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