Buy Cummins India, target price Rs 4,300: Motilal Oswal Financial Services

Motilal Oswal Financial Services has a buy call on Cummins India Ltd. with a target price of Rs 4,300. The current market price of Cummins India is Rs 3575.95 . Cummins India, incorporated in 1962, is a Mid Cap company with a market cap of Rs 99082.37 crore operating in the Engineering sector.

Cummins India's key products/revenue segments include Engines, Sale of services, Other Operating Revenue, Export Incentives and Scrap for the year ending 31-Mar-2024.

Financials

For the quarter ended 30-09-2024, the company has reported a Consolidated Total Income of Rs 2613.91 crore, up 8.04 % from last quarter Total Income of Rs 2419.29 crore and up 29.96 % from last year same quarter Total Income of Rs 2011.35 crore. Company has reported net profit after tax of Rs 397.24 crore in the latest quarter.

Investment Rationale
Motilal Oswal Financial Services maintains its estimates and expects a CAGR of 18%/20% in revenue/PAT over FY24-27 for Cummins India. The brokerage has built in an EBITDA margin of 20.4%/20.5%/20.5% for FY25/FY26/FY27. The stock is currently trading at 38.7x/32.9x on FY26E/FY27E EPS. Motilal Oswal maintains its target price of Rs 4,300, based on 45x two-year forward EPS. They have reiterated a BUY rating on the stock.

Key risks and concernsKey risks to the brokerage recommendation would come from lower-than-expected demand for key segments, higher commodity prices, increased competitive intensity, and lower-than-expected recovery in exports.

Promoter/FII Holdings
Promoters held 51 per cent stake in the company as of 30-Sep-2024, while FIIs owned 17.5 per cent, DIIs 22.38 per cent.