Downgrades

Delay in order finalization leads to 45% decline in OI, but healthy ordering visibility seen in both domestic and international markets. GE T&D; (GETD) reported strong quarterly performance led by stellar execution, cost rationalization measures and higher other income. Sales grew by 10% YoY as manufacturing and project sites were operating at full capacity. Order inflow decline 45% to Rs6.9bn owing to delay in order finalization. Order book stood decent at Rs49bn (excluding L1 Rs3bn)...

Management remains cautious on demand recovery in both Domestic and Exports market and expects current economic scenario to persist in short run. Cummins India (KKC) reported a decent performance for 1Q amidst the pandemic with cost control measures and higher other income boosting profitability. Execution was weak on account of severe impact of Covid-19 pandemic as factory sites were in containment zone. Domestic/exports revenues decline 64%/61% YoY for the quarter. Within the domestic market,...

technology access may not be as big a barrier to competitors (KOEL, Mahindra, and Perkins), 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), the implementation date is set as July 2021, which may be pushed by six to nine months, especially given the COVID- 19-led disruption. However, the key end markets Manufacturing, Real Estate, Retail, and Hospitality are likely to remain under pressure, with a sluggish growth outlook over the next two years. Even the transition to CPCB-II met with a similar fate, with an anticipation of pre-buying, followed by price hikes, and hope of earnings growth. Given the weak outlook for the end markets and limited pricing power in the Gensets industry, we refrain from being bullish on CPCB-IV opportunities. Currently, macro headwinds remain too strong for the industry to witness double-digit growth on a sustainable basis in the domestic market.

We recommend a BUY on Cummins India Limited with a Target Price of Rs 470, an upside of ~9% from CMP of Rs. 432 and Stop Loss Rs 410.

We recently attended a concall hosted by Mr. Ashwath Ram- MD Cummins Change in Estimates | Target | Reco (KKC) India addressing concerns on Covid-19. Management remains very cautious on recoveries due to economic slowdown. While domestic markets...

Looking at slow recovery cycle, with bleak near-term outlook: The already weak business outlook has worsened, due to the COVID-19 situation impacting the entire global supply chain. Management expects the situation to worsen before there is any improvement in sight. The pace and timing of recovery depends on the likely government stimulus in India and individual overseas markets. On the optimistic side, domestic demand is expected to take six to nine months to recover. Domestic business outlook: Distribution, Industrial, and Powergen: a)...