Cummins: Focus is the key - Views on News from Equitymaster

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

  • MyStocks


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

Cummins: Focus is the key

Oct 4, 2001

Cummins India, the diesel engines major, has not had a great FY01. The company recorded a 17% growth in profits and a 4% rise in topline for the year ended March '01. The company's revenues in the fourth quarter dropped by about 2% and operating margins fell by 60 basis points. This affected the overall financial performance. Cummins India is a 51% subsidiary of Cummins Engines USA, and is engaged in the manufacture of various types of engines (5-5,000 HP) and reciprocating gas turbines. Its engines find use across a range of industries – i.e. in gensets, earthmoving/construction equipment, compressors and other industrial applications. Exports (mainly to its parent) accounts for 40% of revenues. After sales services are offered by a 100% subsidiary company.

During FY01 the company’s management had stated that it would focus on products and services that take care of the client’s total power needs. Till now the company provided mechanical devices. Now it is looking at electronically intelligent products (viz. engines). Its aim is to provide total solutions to its customers right from providing engines, to maintaining them for a fee, to upgrading them when the need arises and all this is planned via its new IT pronged strategy. The strategy is to package both engines and value added services and assume full responsibility of assured power generation.

Though the Cummins group wants to retain engines as its core focus, it is looking at other avenues to add to its growth potential. Cummins Incorporated, USA, the parent, has 12 entities in India with a turnover of Rs 17 bn. Cummins Diesel Sales and Services (CDSS), Tata Cummins, Power Systems India Limited are some of these. The group is looking at having a finger in every conceivable pie. It has a joint venture (JV) with Crompton Greaves for alternators. Its Tata Cummins JV has presence in the automotive engine segment. But one of its most ambitious forays is Cummins Infotech, its proposed software development, ERP implementation and e-business (B2B) arm. The company has invested Rs 35 m in this subsidiary, with Cummins Inc, USA as a majority stakeholder. The aim is to provide solutions not only for its Indian operations but also to use the same knowledge for Cummins worldwide networks.

However, despite these ambitious plans, the domestic market remains stagnant. Cummins mining customers are postponing purchases because of a bad market outlook. Though there is no doubt that India is an important market for Cummins Inc., its many forays and entities in India worry investors.

However, it must be said that the management of the company is sound and knows the business well. The company is a dominant player in most of the segments and is better geared than others to take advantage when the outlook improves. At Rs 48 the stock trades at a P/E of 8.8x FY01 earnings.

Equitymaster requests your view! Post a comment on "Cummins: Focus is the key ". Click here!


More Views on News

CUMMINS INDIA Announces Quarterly Results (3QFY20); Net Profit Down 0.5% (Quarterly Result Update)

Jan 30, 2020 | Updated on Jan 30, 2020

For the quarter ended December 2019, CUMMINS INDIA has posted a net profit of Rs 2 bn (down 0.5% YoY). Sales on the other hand came in at Rs 15 bn (down 3.3% YoY). Read on for a complete analysis of CUMMINS INDIA's quarterly results.

CUMMINS INDIA Announces Quarterly Results (2QFY20); Net Profit Down 13.4% (Quarterly Result Update)

Nov 1, 2019 | Updated on Nov 1, 2019

For the quarter ended September 2019, CUMMINS INDIA has posted a net profit of Rs 2 bn (down 13.4% YoY). Sales on the other hand came in at Rs 13 bn (down 12.0% YoY). Read on for a complete analysis of CUMMINS INDIA's quarterly results.

CUMMINS INDIA 2017-18 Annual Report Analysis (Annual Result Update)

Jul 18, 2019 | Updated on Jul 18, 2019

Here's an analysis of the annual report of CUMMINS INDIA for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of CUMMINS INDIA. Also includes updates on the valuation of CUMMINS INDIA.

Garden Reach Shipbuilders and Engineers Ltd: Is This PSU Shipbuilder Worth Betting On? (IPO)

Sep 24, 2018

Should you apply for the IPO of Garden Reach Shipbuilders and Engineers Ltd?

H.G Infra Engineering Ltd. (IPO)

Feb 24, 2018

Should you subscribe to the IPO of H.G Infra Engineering Ltd.?

More Views on News

Most Popular

Buy this 'Crorepati Stock' and You Could End Up Stinking Rich (Profit Hunter)

Feb 5, 2020

I'm talking about an individual small cap stock that could go up so many times that they make their investors stinking rich in the process. You definitely want to know more...

This Smallcap Stock Could be the Next Titan (Up 1,400% in 10 Years) (Profit Hunter)

Feb 11, 2020

A blueprint to latch on to the next 'Crorepati' stock - and an event I hope you won't miss on any account.

Will Your Trade Go Up or Down Today? (Fast Profits Daily)

Feb 5, 2020

How you can find out which way your trade is likely to move on any given trading day.

Will Algo Traders Take Away All Your Profits? (Fast Profits Daily)

Feb 11, 2020

How to fight back against algo trading systems.

No Change in My Long-Term View on the Rebirth of India Stocks (The 5 Minute Wrapup)

Feb 6, 2020

Why the recent post budget volatility has not affected my bullish view on the Rebirth of India stocks.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get our special report, Secret to Increasing Your Trading Profits Today Now!
We will never sell or rent your email id.
Please read our Terms


Feb 17, 2020 03:35 PM


  • 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