X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Cummins Ltd: Exports boost growth - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Cummins Ltd: Exports boost growth
Jun 22, 2015

Cummins Ltd has announced the fourth quarter results of financial year 2014-2015 (4QFY15). While the topline grew by 16.7% YoY bottomline grew at a faster pace of 34.3% YoY during the quarter.

Performance summary
  • Net sales increase 16.7% YoY during 4QFY15.
  • Operating profits increase 2.9% YoY while margins erode by 2.1% YoY to 15.5% during the quarter.
  • Despite modest operating performance, net profits increase by 34.3% YoY amidst 110.1% YoY rise in other income and 10.4% YoY fall in interest expenses coupled with a 29.9% YoY fall in tax expenses.
  • The board of directors have announced total dividend of Rs 14 per share for the fiscal under consideration.
  • The company continues to remain virtually debt free and has cash balance of Rs 798.6 m at the end of the year.
  • For current fiscal capex is expected to be in the range of Rs 5.5-6 bn.

Financial Snapshot
(Rs m) 4QFY14 4QFY15 Change FY14 FY15 Change
Total income  9,716 11,335 16.7% 39,767 44,058 10.8%
Expenditure  8,007 9,576 19.6% 32,799 36,708 11.9%
Operating profit (EBITDA) 1,709 1,759 2.9% 6,967 7,351 5.5%
Operating profit margin (%) 17.6% 15.5%   17.5% 16.7%  
Other income 315 661 110.1% 1,777 2,866 61.3%
Interest 11 10 -10.4% 42 45 8.1%
Depreciation 146 191 30.9% 528 797 51.1%
Profit before tax & exceptional items 1,867 2,220 18.9% 8,175 9,374 14.7%
Tax 450 315 -29.9% 2175 1,515 -30.3%
Profit after tax/(loss) 1,418 1,904 34.3% 6,000 7,859 31.0%
Net profit margin (%) 14.6% 16.8%   15.1% 17.8%  
No. of shares (m)         277.2  
Basic & diluted earnings per share (Rs)         28.3  
P/E ratio (x) *         32.1  
* On trailing 12 month basis

What has driven performance in 4QFY15?
  • Sales increase 16.7% YoY during 4QFY15. Domestic sales were up 6% YoY while exports were up 35% YoY during the quarter. For the full year sales were up 10.8% YoY. While domestic sales were down by 4% YoY exports sales were up by 44% YoY. Exports have showed phenomenal growth as volumes of power generation set sales from Phaltan started showing uptick.

  • Operating profits increased 2.9% YoY with margins declining to 15.5% largely due to pricing cuts undertaken by the company. Further, due to launch of CPCB norms the material cost has gone up which again put pressure on margins.

  • Despite a modest performance at the operating level the company reported 34.3% YoY growth in profits due to rise in other income and fall in tax expenses. Taxes have been lower as production at sites having tax benefits increased.
What to expect?
At the current price of Rs 910, the stock trades at around 32.1 times its trailing twelve month earnings.

Management expects domestic and export sales to grow by 10-15% and 0-5% respectively for FY16. With new players entering the low KVA gen sets space competitive intensity has increased considerably but nevertheless management is confident that once the GDP growth gets back on track there will be enough on platter for every player. Basically the market size itself is expected to increase over the course of time once growth picks up. With respect to margins management expects to maintain 15-17% range as has been the case in the past as cost reduction initiatives are likely to bear fruits in the medium term.

While the management commentary indeed appears to be optimistic valuations at 32x TTM earnings appear to be on the expensive side. Further, growth in the domestic market is also fraught with challenges considering the entry of new players. As such we maintain our view of buying the stock at lower levels.

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.

DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.

GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.

DETAILS OF ASSOCIATES:
Details of Associates are available here.

DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. Equitymaster has financial interest in the subject company.
  2. Equitymaster's Associates, Research Analyst or his/her relative do not have any financial interest in the subject company.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  4. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

CUMMINS INDIA SHARE PRICE


Apr 23, 2018 (Close)

TRACK CUMMINS INDIA

  • Track your investment in CUMMINS INDIA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

CUMMINS INDIA 5-YR ANALYSIS

COMPARE CUMMINS INDIA WITH

MARKET STATS