Cummins reports 22% jump in net - Views on News from Equitymaster

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Cummins reports 22% jump in net

Feb 1, 2001

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.

(Rs m) 3QFY00 3QFY01 Change 9m FY00 9m FY01 Change
Sales Turnover 2,117 2,272 7.3% 5,882 6,269 6.6%
Other Income 53 62 17.0% 137 150 9.1%
Total expenditure 1,802 1,906 5.8% 4,962 5,189 4.6%
Operating Profit (EBDIT) 315 366 16.2% 920 1,080 17.4%
Operating Profit Margin (%) 14.9% 16.1%   15.6% 17.2%  
Interest 11 4 -63.6% 24 14 -42.8%
Depreciation 60 65 9.5% 177 189 7.0%
Profit before Tax 297 359 20.8% 856 1,027 20.0%
Tax 85 101 18.5% 246 285 15.7%
Profit after Tax/(Loss) 211 257 21.7% 610 742 21.7%
Net profit margin (%) 10.0% 11.3%   10.4% 11.8%  
No. of Shares (eoy) (m) 39.6 198.0   39.6 198.0  
Diluted No. of shares outstd. (m) 198.0 198.0   198.0 198.0  
Earnings per share*       4.1 5.0  
*(annualised)            
Current P/e ratio         16.7  

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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