MOSL: CUMMINS (Buy)- FY17 Annual Report-Infrastructure spend to drive domestic growth

​Cummins | FY17 Annual Report: Infrastructure spend to drive domestic growth; Key takeaways from FY17 annual report

(KKC IN, Mkt Cap USD4.4b, CMP INR1028, TP INR1200, 17% Upside, Buy)

• Domestic market revival to be driven by infrastructure segment investments
  
• Expanding product portfolio to cater to incremental global and local demand
  
• Healthy free cash flow generation led by working capital cycle improvement
  

Domestic market revival driven by infra investments by the government; has identified new opportunities in exports

• Cummins (KKC) will continue to benefit from the government’s ongoing investments in infrastructure and the implementation of GST reforms. Moreover, with revival in the global economy, exports should also revive.
  
• Power Generation: The government’s renewed push on infra and industrial development should drive demand for DG sets. KKC sees new opportunity as a supplier of rail under-cars and also sees strong demand in FY18 from the Indian Navy/Coast Guard alongside other defense opportunities.
  
• Industrial: KKC retains its leadership in construction equipment segments like excavators, wheel loaders, road machinery equipment, and water well rigs.
  
• Distribution: The company continues to see good growth, driven by healthy orders for spare parts, improving penetration of service contracts, and demand for engines from key accounts.
  
• Exports: KKC is strongly positioned, as global markets recover. It has identified opportunities to supply additional parts to Cummins’ various Engine Plants and Part Distribution Centers, globally.