Surprise package: Cummins India

Cummins India, which has underperformed other capital goods stocks since April 2001, jumped 6.8 per cent to Rs 467.35 after first quarter results exceeded analyst expectations.

Sales rose 20 per cent in April-June despite a bad market for engineering companies. Operating profit grew 7 per cent while net profit rose 30 per cent.

At Thursday's closing price, Cummins India trades at a price to earnings of 19 times 2012-13 estimated earnings, cheaper than its multinational peers. ABB trades at 47 times, Siemens at 29 times, and Alstrom T&D at 30 times 2012-13 estimated earnings.

An ICICI Securities report dated July 16 says the company is poised to benefit from changes in emission norms, cleaner energy requirements and growth in engine demand. Growth shouldn't be a problem for Cummins and margins should improve led by better technology and distribution reach.