Cummins India Ltd. share price target

Op. performance below expectations: KKC missed our expectations on all fronts. Revenue growth was tepid at 1% YoY (our estimate: 10%) in 1QFY20 due to a decline in exports (-26% YoY). De-growth in the higher-margin export business dragged the overall margin to its lowest level in a decade at 11.3%. Thus, EBITDA declined 30% YoY to INR1.5b (35% miss). Adj. PAT was down 23% YoY to INR1.4b (25% miss). The root cause weak demand trends in overseas markets: The decline in exports is attributable to weak demand in the key markets of Africa, the...

CIL has provided a FY20 guidance of 10-15% YoY for its domestic operations, while its guidance for the export market is weak. Weak global cues may continue to put pressure on the overall earnings of the company. Therefore, we revise our rating to Hold and value CIL at...

Cummins Delivers Q4 in line with Expectation; Adverse Product Mix Dent Margins: Cummins India (Cummins) earnings for Q4 came in line with our expectation at Rs. 5.08. Domestic revenue grew by 22% to Rs. 9.9 Bn and export revenue dropped by 17% to Rs. 3.2 Bn which dented gross margins by 70 bps YoY in Q4.

impacted by lower gross margin (-70bp YoY; 34.2%) and higher employee expenses (10% v/s 9.6% in 4QFY18). Adj. PAT declined 13% YoY to INR1.4b (our est. INR1.7b), impacted by lower-than-estimated other income of INR692m (our est. INR814m) and higher-than-estimated tax rate of 32.4% (our est. 29.5%). For FY19, Sales/EBIDTA/PAT increased 11%/24%/2% YoY. Domestic business shines; but exports decline sharply: Domestic business grew a robust 22% YoY to INR13.3b, on strong growth in Power Generation (+21% YoY) and Industrial (+37% YoY) segments. Demand from Data center,...

Change in product mix impacts margin: Q4FY19 sales were up 9% YoY at Rs13.4 bn (PLe Rs14 bn). Domestic sales in Q4FY19 was up 22% YoY at Rs9.9 bn. However, exports fell by 17% YoY at Rs3.2 bn. EBITDA margin contracted 120bps YoY to 12.8% due to 70bps YoY dip in gross margin. This was due to change in product mix with higher share of lower range engines. Hence EBITDA was flat YoY at Rs1.7 bn. Finance cost was up 32% YoY at Rs 45mn. Tax rate for the quarter was higher at 32.4% compared to 22.8% in Q4FY18. Hence PAT for the quarter came to Rs1.4 bn, down 13% YoY. FY19 sales were up 11% YoY at Rs56.6...

Cummins India's (KKC) Q4FY19 results came in below our and Street expectations. Domestic sales rose 22% yoy, mostly due to a 17% yoy decline in exports. The exports decline further impacted margins and also led to a higher tax rate. KKC has guided for strong domestic growth of 10-15% in FY20 with upside risks, while exports outlook remains challenging with flat to negative growth. Our feedback from OEM...

Key point to note Cummins India has not hiked prices for the last four years. While it is the market leader in HHP (~60% share) and MHP segment (~50% share), Cummins is focusing on gaining greater market share in few selective nodes in the 750kv and above segment a key focus area for the company. It has also developed new growth areas in the domestic market; a segment like Railways now contributes INR2.5b to sales. Cummins also expects manufacturing to start contributing to revenue. guidance for FY20, Cummins India expects 10-12% growth in the Domestic market backed by strong growth across infrastructure segments like Data Centers, Hospitality and Metro. Demand for Powergen segment products (major part of its exports business) has witnessed a decline. Even key markets like the Middle East (slowdown in investment) and Africa (payment concerns), which contributes 50% to LHP exports have not picked up.

Q3FY19 revenue grew by 11%YoY led by 14% growth in domestic sales while exports grew by 4.7%YoY. 9MFY19 revenue growth was at 12%YoY. Despite ~200bps decline in Gross margins, EBITDA margins improved by ~50bps due to control on other expenses (-6%YoY). The full impact of the price hike taken by the company is expected from Q4FY19E onwards which will add to the revenue growth. Revenue growth guidance have been revised upward to 13-15% from 1012% for domestic while exports to 4-5% from 3-5% for FY19E. Revenue/PAT is expected to grow at 12% and 8% CAGR over FY18-21E...

7 February 2019 3QFY19 revenue grew by a healthy 11% YoY to INR15.0b, in line with our estimate of INR14.9b. EBITDA grew 15% YoY to INR2.3b, below our estimate of INR2.4b. Operating margin improved 60bp YoY to 15.1%, supported by lower other expenses (10.8% v/s 12.7% in 3QFY18). Adj. PAT increased 9% YoY to INR1.9b, marginally ahead of our estimate of INR1.8b, driven by higher-than-estimated other income (INR755m v/s INR501m in 3QFY18). For 9MFY19, revenue/EBIDTA/PAT increased by 13%/25%/19% YoY.

Cummins India Limited, 51% subsidiary of US based Cummins Inc limited, is India's leading manufacturer of diesel and natural gas engines. One of the eight legal entities of the Cummins Group in India, Cummins India Limited comprises of three business units - Engine, Power Systems, and Distribution. CIL is a market leader in the all key product categories in India with exports (including exporting to Cummins group of companies globally) being a major part of Cummins India limited revenues, CIL has its plants located at Kothrud, PDC at Phaltan, Power...