The diesel engines major, Cummins India, has reported a 22% jump, both in its 3QFY01 bottomline as well as its nine month consolidated FY01 bottomline. The company's turnover recorded a growth of 7% in 3QFY01.
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The small improvement in topline does indicate a revival for the engineering sector. However, the company's profitability has improved on the back of lesser interest burden (43% decline during 9 months). As a result the company's net margins improved by 130 basis points in 3QFY01 and by 140 basis points in the nine months ended December 31, 2001.
During the quarter October to December 2000, the Company has invested Rs 35 million in the share capital of Cummins Power Solutions Limited (CPSL). CPSL is a wholly-owned subsidiary of Cummins India Limited. The move is to enhance its services focus, which the engineering industry as a whole has identified as an emerging market.
In 3QFY01, the company split its equity shares in the ratio 5:1. As a result, the company's equity share face value stands at Rs 2 currently.
The Cummins stock trades at a P/e multiple of 16.7 times its annualised nine month FY01 earnings. In light of the company's perfromance, we believe that the stock has been given a fair rating by the bourses.
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