Cummins India 1Q: forex earnings led margin growth
Cummins India - one of India's major diesel engines producer has recorded a 17% growth in its net profit in 1QFY2001 compared to the correponding quarter in the previous year. The company's turnover improved by almost 10% to Rs 1,957 m during the same period.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (m)
Earnings per share*
Cummins India is a 51% subsidiary of Cummins Engine Co. USA (the world's largest independent diesel engine manufacturer above 200HP). Tradationally, the Indian subsidiary exports almost 30-35% of its products to its parent.
Cummins' expenditure saw a similar surge as turnover (up about 10%), still its operating margins improved. A 22% jump in its export earnings during the current quarter must have had a positive impact on the company's operating margins.
The marked improvement in the company's performance is a sign of the improving demand scenario in the manufacturing sector.
The stock surged 5% today on the back of these results. The stock currently trades at a P/E multiple of 23 times its FY2001 annualised earnings. Looking at the current market scenario this P/E rating is a shade on the higher side. Unless the company has something new up its sleeve, the stock will continue to hover around this price for some time.
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