Cummins India 1Q: forex earnings led margin growth - Views on News from Equitymaster

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  • Jul 27, 2000 - Cummins India 1Q: forex earnings led margin growth

Cummins India 1Q: forex earnings led margin growth

Jul 27, 2000

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.

(Rs m) 1QFY00 1QFY01 Change
Sales 1,781 1,957 9.9%
Other Income 24 32 31.0%
Expenditure 1,495 1,639 9.7%
Operating Profit (EBDIT) 287 318 11.0%
Operating Profit Margin (%) 16.1% 16.3%  
Interest 6 5 -14.5%
Depreciation 72 81 12.4%
Profit before Tax 246 284 15.5%
Tax 72 81 12.4%
Profit after Tax/(Loss) 174 203 16.8%
Net profit margin (%) 9.7% 10.4%  
Forex earnings 537 653 21.5%
No. of Shares (eoy) (m) 39.6 39.6  
Earnings per share* 17.5 20.5  
*(annualised)      

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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