MOSL: CUMMINS INDIA (Buy)-Results below expectations, led by weak domestic performance
Cummins India: Results below expectations, led by weak domestic performance
(KKC IN, Mkt Cap USD2.6b, CMP INR672, TP INR800, 19% Upside, Buy)
- Operating performance below expectations: 1QFY19 revenue declined 1% YoY to INR13.3b, below our estimate of INR14.3b. EBITDA grew 10% YoY to INR2.1b (our estimate: INR2.2b), with margin expanding 160bp YoY to 16.2% (our estimate: 15.6%). Margin expansion was driven by better revenue mix (+100bp) and foreign exchange gain during the quarter (+50bp). Adjusted PAT rose 10% YoY to INR1.8b, impacted by higher depreciation during the quarter (INR271m v/s INR208m in 1QFY18).
- Weak domestic performance impacts 1QFY19 revenue: Domestic business declined 7% YoY to INR8.6b, impacted by (a) pre-buying, which happened in 1QFY18 due to implementation of GST, (b) price reduction, and (c) supply constraints faced at the supplier end. Exports grew by a healthy 12% YoY, supported by demand recovery in the global economy and certain geographies like Middle East, Africa and LATAM. Demand for LHP products has picked up whereas demand for HHP products remains steady.
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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