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11th June, 2024

Cummins India Ltd. Target Price – INR 4,158 CMP – INR 3,580 Upside – 16.1% Rating - BUY
About the company:
• Formed in 1962, Cummins India Limited, the largest entity of Cummins in India, stands as the country’s leading manufacturer of diesel and natural
gas engines. As one of the seven legal entities of the Cummins Group in India, Cummins India Limited comprises three main business units: Engine,
Power Systems, and Distribution.
• The Engine Business manufactures engines ranging from 125 to 400 HP for low, medium, and heavy-duty on-highway commercial vehicle markets,
as well as off-highway commercial equipment industries such as construction and compressors (49 HP to 430 HP). The Power Systems Business
designs and manufactures robust engines with horsepower ranging from 700 HP to 4500 HP, catering to sectors like marine, railways, defense, and
mining. These engines are tailored to meet the specific demands of each industry, ensuring reliable and powerful performance across diverse
applications. Cummins Power Generation systems also design and develop integrated generator sets ranging from 7.5 kVA to 3750 kVA. This
comprehensive range highlights the company's commitment to delivering high-performance solutions across various industries, providing
uninterrupted power sources for applications in both residential and commercial sectors, including heavy-duty machinery, healthcare, and data
centers.
Healthy Volume Improvement and Market Insights:
CUMMINS V/S SENSEX
Cummins India announced their Q4 results on May 29, 2024, showcasing a 19.92% increase in revenue
500.00 and a substantial 54.44% rise in profit year-over-year. Despite an 8.75% decline in revenue compared to
the previous quarter, profit saw an 8.01% increase. Notably, selling, general, and administrative expenses
400.00 decreased by 9.66% quarter-over-quarter but rose by 20.55% year-over-year. Operating income
experienced a slight sequential decrease of 0.48% but demonstrated a robust 69.62% growth year-over-
300.00 year. The Earnings Per Share (EPS) for Q4 stood at ₹19.44, marking a significant 54.47% increase from
200.00 the previous year.
For the quarter, Cummins India reported total sales of ₹2,269 crore, a 20% increase year-over-year but a
100.00 9% decline from the previous quarter. Domestic sales reached ₹1,925 crore, up 38% year-over-year but
0.00 down 12% sequentially. Export sales were ₹344 crore, down 30% year-over-year but up 6% sequentially.
Profit before tax stood at ₹701 crore, marking a 70% year-over-year increase and a 16% rise from the
Jul/21

Aug/23
Mar/23
Oct/22
Dec/21

Jan/24
Feb/21

May/22

previous quarter. Profit after tax was ₹562 crore, reflecting a 76% increase year-over-year and a 23%
sequential increase.
Overall Macro and Micro factors with Future insights:
Sensex Cummins India Ltd The Indian economy remains resilient despite the impact of geopolitical events and other economic
challenges affecting global growth. Key economic indicators, such as a GDP growth rate of 7.6% and
Source: BSE consistent PMI, reflect optimism about continued growth. Robust tax collections indicate underlying
economic activity. The Indian Government’s continued focus on infrastructure and increased budget
Revenues from operations allocations are driving growth in key markets for the company. However, internationally, geopolitical risks
and conflicts continue to create uncertainty regarding global trade and supply chain stability.
14,000 Cummins India recorded another year of record revenue and profit, driven by strong domestic market
12,000 demand, while the export market remained soft. The company successfully launched the CPCB IV+ range
of products, which received positive customer feedback. With a strong balance sheet and liquidity, the
10,000
company is well-positioned to support its operations and future growth plans. Investment in infrastructure,
8,000 both public and private, along with broader economic growth, continues to drive profitable growth for the
6,000 company. As the Powergen Market transitions, CPCBII products will be available until June 30, 2024, after
which CPCB IV+ emission norms-compliant products will dominate. The company has a robust portfolio of
4,000 these compliant products to meet customer demand across its entire range. While global economic
2,000 uncertainties may impact exports in the near term, Cummins India closely monitors geopolitical events and
their effects on global demand and supply chains. The company’s diversified product portfolio and efforts
0 toward export recovery demonstrate its adaptability. Additionally, Cummins India benefits from a trusted
brand, an extensive product range, access to cutting-edge technology, valued stakeholder relationships,
world-class manufacturing capabilities, top-tier talent, and a customer-centric service organization with an
extensive distribution and service network throughout India and neighboring regions.
90 25% Concall highlights:
80 • Expecting double-digit growth over the fiscal year 2023-24 and Continuously working on improving
70 20% margins and managing costs for profitable growth.
60 • Facing competition from overseas players with lower margin expectations in the high horsepower
15% segment.
50
40 • Experienced a decline in exports in the last year, especially in Europe, Middle East, Africa, and Asia
10% Pacific.
30
20 • Developing fuel-agnostic platforms for multi-fuel usage, including hydrogen.
5%
10 • Working on electrolyzer and fuel cell technology for potential applications in railway engines, mining
trucks, marine shipping lines.
0 0%
• Transitioning to CPCB-IV+ compliant products effective July 1, 2024, to meet changing emission
norms.
Valuation and View:
EPS Cummins India Ltd, primarily attributed to the complete adoption of CPCB IV+ norms, which promise
higher realizations. Additionally, the company foresees expedited margin recovery in the future, driven by
PAT margin increased sales in the distribution segment. Despite an expected moderation in benefits witnessed in
Q4FY24 due to shifts in product mix, these positive developments prompt a BUY recommendation for
EBITDA margin
Cummins India Ltd. Based on our analysis, applying a Price-to-Earnings (PE) multiple of 54.0x to the
projected FY26 EPS of INR 77 , indicates a target price of INR 4158.
Source: Wealthyvia Research
 Cummins India Ltd.
Income Statement for Cummins India Ltd.
Particulars (Rs in Cr) FY21 FY22 FY23 FY24 FY25E FY26E
Revenue from operations 4,360 6,171 7,772 8,860 10,282 12,318
Growth Rate (%) - 41.5% 25.9% 14.0% 16.0% 19.8%
Cost of Material
2,330 3,574 4,568 4,813 5,862 6,985
Purchases of traded goods
455 571 781 939 1,025 1,257
Changes in inventories of finished
goods and work-in-progress -21 -39 -127 18 -70 -86
Employee benefits expense
510 615 649 801 937 1,089
Other Expenses
505 561 653 658 854 991

EBITDA 1,248 1,629 1,674 2,083

582 888
EBITDA Margin (%) 13.3% 14.4% 16.1% 18.4% 16.3% 16.9%
Depreciation and amortisation expense
127 136 142 159 200 228

EBIT 1,106 1,470 1,474 1,854

455 752
Other income
274 243 308 518 471 591
finance cost
17 12 16 27 25 31
Profit before Exceptional Items
712 983 1,398 1,961 1,921 2,414
Exceptional Items
0 132 -14 -2 67 18
Share of profit of joint ventures and
associate after tax 113 91 208 245 237 318
Profit before tax
825 1,207 1,591 2,205 2,225 2,751
Total tax expense
190 273 363 484 500 617
Tax % 23% 23% 23% 22% 22% 22%

Profit for the year 1,228 1,721 1,725 2,134

635 934

PAT Margin (%) 14.6% 15.1% 15.8% 19.4% 16.8% 17.3%

No. of shares 27.7 27.7 27.7 27.7 27.7 27.7

EPS 22.9 33.7 44.3 62.1 62.2 77.0

Cummins India Ltd.

Technical Outlook:
• The stock experienced a sideways trend from July 2023 until January 2024. Following this period, there was a
significant upward movement, forming a Rally Base Rally pattern.
• If the stock breaks above this pattern, we anticipate further upward momentum.
• The first target is set at 4148, with a second target at 4292.3. A stop loss should be placed at 3354.5 to manage
potential downside risk.
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