Buy Cummins India; target of Rs 606: Sharekhan

Sharekhan's research repor on Cummins India

The company reported strong outperformance on OPM led by favorable mix , cost reduction measures and pricing impact. Export revenues rise 18% y-o-y while domestic revenues declined 22% y-o-y. Company is witnessing m-o-m and q-o-q recoveries pretty much in every segment. However, management remains cautiously optimistic and refrained from giving revenue guidance for FY2021 Considering revival in its net earnings growth trajectory (23% CAGR) over FY2021E-FY2023E, strong balance sheet and steady cash flow generation, we remain optimistic on the company.

Outlook

We recommend Buy on Cummins India (Cummins) with a PT of Rs 606, given high net earnings growth trajectory over FY2021E-FY2023E and discounted valuations.

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