Cummins India Research Report By Microsec

We recommend Cummins India Ltd (KKC) a “STRONG BUY”. We had earlier recommended Cummins India Ltd a “BUY” at INR462 in our report dated 6th May, 2013 with a Target price of INR556. The stock had surpassed our target price of INR556. We are re‐initiating the stock at current level on account of strong growth in domestic revenue supported by powergen business and recovery in industrial business, exponential growth in exports, volume growth due to pre‐ buying on change of emission norms, ~15‐20% price hike post emission norms, and stable margins due to its cost control efficiencies. At the current price of INR873, the stock is trading at adjusted P/E of 34x its FY15e EPS and 29x its FY16e EPS. We believe that KKC will continue to enjoy premium valuations due to its dominant market positioning, impressive long‐term growth outlook, healthy balance‐sheet, strong ROE as compared to its peers and dividend yield of ~2.83%.

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