Cummins India Ltd. share price target

Revenue increased by 5.93% to Rs. 1324.13 Cr in Q3FY17 when compared to the previous quarter. Also, it grew by 19.62% when compared with Q3FY16.

Revenues at peak: Even in a demonetization scenario, the domestic revenues were up 16% YoY/11% QoQ at Rs.9.7bn. Given the front loaded push by Govt., KKC continues to guide for 10-12%. Lower kVA products were dented by demonetization. Exports, however, grew 23% YoY at Rs4.4 bn. Soaring crude oil prices and commodities in general should augur well for K and Q series, we believe. Yet KKC downplays that prospect in near to medium term. Critical geographies are yet to deliver a decisive trend. Steady gross margins: As we have always pointed, gauging the product mix trend is difficult. And going by Q2FY17 commentary, the downtrend of margins, as company pointed out, has...

Cummins Indias (CIL) 3QFY17 results were ahead of our estimates led by a strong revenue growth ( 19% YoY) across both domestic ( 16% YoY) and exports ( 25% YoY). However the mgmt maintained that current quarter exports growth is not sustainable. Adverse product mix was compensated by production efficiencies resulting in flattish RM/sales (64.4%).

Guidance revised partly for FY17E: Cummins India (Cummins) managementcontinues to maintain the full year guidance for FY17E for domestic market at 10%-12% while the same for exports market has been revised from contraction upto 5.0% to near flat revenues.

Propped up by hectic domestic road construction activity, Cummins India's industrial business grew by an astonishing 34.6% in H1 - with revenue growth in excess of 20% for last three quarters - with notable advances in compressors (35% growth), construction (50%) and railways (50%). After reversing course last fiscal, the distribution business - reinforced by railways, construction and mining segments - ascended by some 12% in the first half of current fiscal. Despite some pick up in off take for nearly all sorts of gensets from realty space, domestic power generation business...

Margins Under Pressure; Domestic Recovery Underway: Half-yearly revenue was flat; margins were under pressure: Cummins India revenue, EBITDA and PAT for H1FY17 reached to Rs.24,784mn, Rs.4,649mnand Rs.4,972mn which is a 1.5% growth in terms of revenue and a drop of 4.4% and 7.0% at EBITDA and PAT level respectively on YoY comparison to H1FY16. On quarterly comparison, revenue, EBITDA and PAT reached to Rs.12,500mn,Rs.1,700mn and Rs.1,969mn respectively in Q2FY17 which is 7.4% higher on revenue and lower at EBITDA and PAT level to the tune of 27.0% and 24.2%respectively on YoY comparison to Q2FY16.

KKC IN beats our expectations. First, the guidance is intact; second, the visibility to product profile is getting stronger. For instance, notwithstanding the conventional 4B, Q, QS and N, we think investors are yet to explore the defense possibilities through 6B and 6C series engines. Outlook on exports, however, continue to remain bleak. Yet rising trend in commodity prices specifically oil, should augur well. Further, with rich product profile, there are too many degrees of freedom that can keep the enviable RoE intact. Maintain BUY....

After two years of demand decline in FY14 and FY15, the DG industry bottomed out in FY16 (flat growth YoY). Growth is likely to revive in FY17; the KKC OEM we met targets volume growth of 5-7%. In 1QFY17, KKC saw 4%...

Subdued exports might have marred the show. Yet Cummins India (KKC IN) product profile acts as insurance for critical applications like data storage, real estate and healthcare. The outlook here is stronger. True, outlook on exports is bleak. And that casts a cloud. Yet we remind that will not be forever. Given superior product profiles be it Q60 engines or be it dual fuel engine for DEMUs, the pricing power and cost efficiency we reiterate will keep the enviable RoE intact. We upgrade the stock to BUY from our earlier ACCUMULATE....

Cummins Indias (CIL) 1QFY17 missed estimates as exports (-21% YoY) continue to witness decline. However domestic sales growth at 7% YoY was in line. Contrary to our expectation, gross margins fell 50bps YoY, which the management attributed to change in mix.