Q4FY23 Review: Cummins India: Delivering strong growth

Cummins India remained upbeat on domestic demand outlook buoyed by strong growth across all end markets spanning infra, manufacturing, hospitality, data centres and real estate too which is slowly bouncing back. It is fully prepared for the CPCB IV+ portfolio across all nodes and is confident of consolidating its market positioning in CY24. In the interim, robust pre-buy is driving factory utilization at 100% levels across 3 shifts in Q1FY24. Customising export portfolio for various applications and markets under Fit-for-market 3.0 is expected to give a renewed push to exports in FY24-25.

Robust domestic offtake: 

Continued execution of data centre projects, sustained growth in manufacturing, services and realty sectors, aided growth across all kW range in FY23. Sale of old CPCB II products witnessed upswing from end Mar-23 and has increased momentum in Q1FY24. Growth in mining & defence was healthy in FY23 while construction rebounded in H2FY23; rail remains soft as new electrification related portfolio is yet to secure the required PQs.

Multiple levers to support exports: 

KKC is upbeat on scaling exports from India for global markets, despite mixed macro environment across developed economies. Africa and SEA continue to support strong growth in LHP volumes, while HHP volumes have sustained. Renewed fir-for market 3.0 approach is expected to further help KKC penetrate in global markets, leverage consolidation in ICE engine platforms worldwide.

H2 initiatives to broaden growth canvas: 

Mgmt is confident of improving gross margins and sustaining OPMs through very tight cost optimisation program. Phased localisation of new products under CPCB IV+ will drive cost savings and competitiveness. KKC is in advance stage of discussion for large H2 transition projects and is committed to set-up local manufacturing footprint, in the listed entity, for related opportunities to drive long term cost competitiveness in its H2 solutions.

Analysts of IIFL Capital Services keep earnings unchanged and closely watch market pricing and acceptance of CPCB IV products towards end FY24. Maintain BUY with 12M TP of Rs1949, implying 18% upside.