IDEA2ACT - Buy: Cummins India

Buy - CUMMINSIND

CMP (NSE) 14:13, 17 Jun

838.55 -10.35-1.22%

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Sector

Industrial Machinery

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Reco. Price

772

Period

12-Months

Target Price

914

upside

%

Stop Loss

0

Last updated on

01 Mar, 2021

Cummins India (KKC) is a 51%-owned subsidiary of Cummins Inc, USA and is the leading manufacturer of diesel engines used in generators in India.  Cummins has eight manufacturing facilities in Maharashtra and Gujarat. The company produces ~40,000 engines annually for the industrial sector and ~10,000 engines annually for power generation. The product range includes diesel engines from 15kVA to 2,000kVA for various power/industrial uses. The business is organised into four segments: power generation, industrial engines, distribution, and exports.

Well placed to leverage the capex upcycle 

Bullish on domestic demand outlook: Cummins is enthused with the sustained improvement in demand across most end-markets which has led to a strong recovery in data-centres, industrial, infra aiding Powergen, while the recovery in construction and mining is driving growth in the industrial segment, offsetting Railways, which is trailing by 6-8 months. Early indicators of revival in capex are stronger than in the previous cycle. Structural tailwinds to data-centres, construction (infra), PLI-linked manufacturing capex and recovery in pockets of real estate, with a relevant and competitive product portfolio, favourably place Cummins to ride the recovery wave in the capex cycle.

Long-term growth levers − Well oiled: Cummins is set to benefit from the rising adoption of emission control across global markets, with its refreshed and cost-competitive portfolio. Strong domestic manufacturing capabilities and consolidation in the engine space are expected to drive long-term growth for Cummins (exports & domestic). Further, access to global technology platforms will enable the company to offer hybrid/green power solutions (battery/hydrogen-led) as & when the domestic market is ready. 

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