MOSL: CUMMINS INDIA (Buy)- Below expected margins impact 4Q performance
Cummins India: Below expected margins impact 4Q performance
(KKC IN, Mkt Cap USD3b, CMP INR752, TP INR910, 21% Upside, Buy)
- Operating performance below expectations: 4QFY19 revenue was in line growing 9% YoY to INR13.4b (our est. INR13.1b). EBITDA stood muted YoY at INR1.7b (our est. INR1.9b). Operating margin declined 120bp YoY to 12.8%, impacted by lower gross margin (-70bp YoY; 34.2%) and higher employee expenses (10% v/s 9.6% in 4QFY18). Adj. PAT declined 13% YoY to INR1.4b (our est. INR1.7b), impacted by lower-than-estimated other income of INR692m (our est. INR814m) and higher-than-estimated tax rate of 32.4% (our est. 29.5%). For FY19, Sales/EBIDTA/PAT increased 11%/24%/2% YoY.
- Domestic business shines; but exports decline sharply: Domestic business grew a robust 22% YoY to INR13.3b, on strong growth in Power Generation (+21% YoY) and Industrial (+37% YoY) segments. Demand from Data center, Construction and Infrastructure segments supported domestic growth. Distribution & Services segment registered moderate growth of 13% YoY to INR3.4b. Exports declined sharply (17% YoY) due to weak demand in key markets of Africa and South America. KKC expects domestic business to deliver healthy growth in FY20 on strong demand in the Infrastructure space; but outlook on exports remain bleak given the weak demand in end markets.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.