Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 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: Eyeing an elusive turnaround - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Dec 5, 2001

    Cummins: Eyeing an elusive turnaround

    Cummins India, the diesel engines major, continues its bad run. Though in FY01 the company recorded a 17% growth in profits and a 4% rise in topline, signs of slowdown had begun to creep in during the company's fourth quarter FY01.

    (Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
    Net Sales 2,040 1,813 -11.1% 3,997 3,655 -8.6%
    Other Income 56 73 29.6% 88 133 51.2%
    Expenditure 1,644 1,531 -6.9% 3,283 3,126 -4.8%
    Operating Profit (EBDIT) 396 282 -28.7% 714 529 -25.9%
    Operating Profit Margin (%) 19.4% 15.6%   17.9% 14.5%  
    Interest 4 4 -12.7% 10 7 -27.2%
    Depreciation 63 54 -15.0% 124 127 2.6%
    Profit before Tax 385 298 -22.5% 669 528 -21.0%
    Tax 103 71 -31.3% 184 137 -25.4%
    Profit after Tax/(Loss) 282 227 -19.3% 485 391 -19.4%
    Net profit margin (%) 13.8% 12.5%   12.1% 10.7%  
    No. of Shares 39.6 198.0   39.6 198.0  
    Diluted Earnings per share* 5.7 4.6   4.9 3.9  
    P/E Ratio   13.2     15.3  

    The company's revenues in the fourth quarter dropped by about 2% and operating margins fell by 60 basis points. The first quarter and the second quarter of FY02 have been even worse. In the September quarter of FY02 Cummins reported 11% decline in topline and a 19% dip in bottomline. For the consolidated 1HFY02, the company reported a 9% dip in topline and 19% dip in net profits.

    Cummins was not able to prune its expenditure in line with the sales slowdown. As a result operating margins took a hit. Even a fall in interest and tax burden was not able to shrug off a fall in company's net margins.

    Cost break-up
    (Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
    Raw material cost 1,190 1,135 -4.6% 2,387 2,263 -5.2%
    Staff cost 173 173 0.3% 355 367 3.3%
    Others 281 223 -20.8% 543 497 -8.4%
    Total expenditure 1,644 1,531 -6.9% 3,284 3,126 -4.8%

    But despite these odds, the company's stock price has run up 27% in the last two months. This may be because investors believe that the worst is over and are hoping for a turnaround in Cummins fortunes. Despite its lacklustre performance Cummins efforts at pruning its debt burden would stand it in good stead when the situation improves. Already, India's No. 1 enginnering company, Bhel, has reported a turnaround in September quarter results and is expectant of better quarters ahead. This feeling may have washed down to Cummins India as well.

    The company is a dominant player in most of the segments it operates in and is better geared than others to take advantage when the outlook improves. However, Cummins Incorporated, USA, the parent, has 12 entities in India. This is a sign of Cummins doing too much and in future there is a fear that it may take away the company's focus. At the current price of Rs 61 the stock is already trading at 15x annualised 1HFY02 earnings. The stock price may have run ahead of fundamentals.



    Equitymaster requests your view! Post a comment on "Cummins: Eyeing an elusive turnaround ". Click here!


    More Views on News

    Cummins Ltd: Domestic Revenues the Saving Grace (Quarterly Results Update - Detailed)

    Aug 14, 2017

    The domestic economy continues to grow largely in areas which are positively impacted through continuing government investments in infrastructure.

    Cummins Ltd: Recovery Not Robust Yet (Quarterly Results Update - Detailed)

    Nov 7, 2016

    Cummins Ltd has announced the second quarter results of financial year 2016-2017 (2QFY17). While the topline grew 6% YoY bottomline saw a marginal decline during the quarter.

    BHEL: Margins Dip into the Negative (Quarterly Results Update - Detailed)

    Aug 14, 2017

    The company also saw order inflows of Rs 18 billion during the quarter, which was a massive 41% YoY lower than the previous year's quarter.

    ABB: Large Orders Remain Muted (Quarterly Results Update - Detailed)

    Aug 2, 2017

    Decisions on government initiatives and private investments were stalled in anticipation of upcoming tax restructure.

    L&T: Amidst a Challenging Business Environment (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Bank credit to industry remained muted and investment momentum was driven mostly by public sector spending.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • 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


    Compare Company With Charts