MOSL: CUMMINS INDIA (Neutral)-Results below expectations, exports decline
​Cummins India: Results below expectations, exports decline; Maintain Neutral
(KKC IN, Mkt Cap USD3.7b, CMP INR968, TP INR950, 2% Downside, Neutral)
- Weak operating performance led by adverse product mix: Cummins India's (KKC) 4QFY17 revenue grew 11% YoY to INR11.8b (est. of INR12.6b). Gross margin contracted 340bp YoY to 34.9% (weakest since FY12). EBITDA declined 4.9% YoY to INR1.7b (est. of INR2.1b), with the margin contracting 240bp YoY to 14.4% (est. of 16.6%, lowest since FY09). PAT fell 5.1% YoY to INR1.6b (est. of INR1.9b). Margin compression was led by an adverse product mix. For FY17, sales stood at INR50.8b (+7.8% YoY), EBIDTA at INR8.0b (+3.4%) and PAT at INR7.3b (-2.6% YoY)
- Domestic business delivers strong performance, exports disappoint: Revenue increase of 11% YoY was led by 18% YoY growth in domestic segment. Domestic revenue was aided by power gen (+14% YoY), industrial (+20% YoY) and distribution & spares (+21% YoY) segments. Exports declined 7% YoY (-33% QoQ) due to overall weakness in the global market (Africa, Middle East). For FY18, KKC guided for negative 5% to flat export revenue growth, and muted 5-10% growth for domestic business.
Cummins India is engaged in the manufacturing of diesel and natural gas engines. Co.'s operations are comprised of four business units; Industrial Engine, which caters to the industrial sector with its spectrum of diesel engines ranging from 65 HP to 3500 HP; Power Generation, which addresses standby and prime power needs through the design and manufacture of pre-integrated generator sets, transfer switches, paralleling equipment and controls; Distribution, which provides products, packages, services and solutions for uptime of Co. equipments; and Automotive, which integrates Co.'s diesel and natural gas engines with related technologies.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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