Cummins: Eyeing an elusive turnaround - Views on News from Equitymaster

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

  • MyStocks

MEMBER'S LOGINX

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

Cummins: Eyeing an elusive turnaround

Dec 5, 2001

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)2QFY012QFY02Change1HFY011HFY02Change
Net Sales2,0401,813-11.1%3,9973,655-8.6%
Other Income567329.6%8813351.2%
Expenditure1,6441,531-6.9%3,2833,126-4.8%
Operating Profit (EBDIT)396282-28.7%714529-25.9%
Operating Profit Margin (%)19.4%15.6% 17.9%14.5% 
Interest 44-12.7%107-27.2%
Depreciation6354-15.0%1241272.6%
Profit before Tax385298-22.5%669528-21.0%
Tax10371-31.3%184137-25.4%
Profit after Tax/(Loss)282227-19.3%485391-19.4%
Net profit margin (%)13.8%12.5% 12.1%10.7% 
No. of Shares 39.6198.0 39.6198.0 
Diluted Earnings per share*5.74.6 4.93.9 
P/E Ratio 13.2  15.3 
*(annualised)      

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)2QFY012QFY02Change1HFY011HFY02Change
Raw material cost1,1901,135-4.6%2,3872,263-5.2%
Staff cost1731730.3%3553673.3%
Others281223-20.8%543497-8.4%
Total expenditure1,6441,531-6.9%3,2843,126-4.8%

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 INDIA Announces Quarterly Results (3QFY21); Net Profit Up 25.7% (Quarterly Result Update)

Feb 1, 2021 | Updated on Feb 1, 2021

For the quarter ended December 2020, CUMMINS INDIA has posted a net profit of Rs 2 bn (up 25.7% YoY). Sales on the other hand came in at Rs 14 bn (down 2.0% YoY). Read on for a complete analysis of CUMMINS INDIA's quarterly results.

CUMMINS INDIA 2019-20 Annual Report Analysis (Annual Result Update)

Nov 4, 2020 | Updated on Nov 4, 2020

Here's an analysis of the annual report of CUMMINS INDIA for 2019-20. It includes a full income statement, balance sheet and cash flow analysis of CUMMINS INDIA. Also includes updates on the valuation of CUMMINS INDIA.

CUMMINS INDIA Announces Quarterly Results (2QFY21); Net Profit Down 20.6% (Quarterly Result Update)

Oct 30, 2020 | Updated on Oct 30, 2020

For the quarter ended September 2020, CUMMINS INDIA has posted a net profit of Rs 1 bn (down 20.6% YoY). Sales on the other hand came in at Rs 12 bn (down 11.3% YoY). Read on for a complete analysis of CUMMINS INDIA's quarterly results.

BHEL Shares Tumble 18% on Disappointing March Quarter Results (Views On News)

Jun 14, 2021

BHEL's net loss narrowed to Rs 10.4 bn in the March 2021 quarter.

Videocon Hits Upper Circuit After NCLT Clears Vedanta Group's Bid (Views On News)

Jun 9, 2021

The stock has fallen over 90% in the last five years. Will it recover?

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.

More

India's #1 Trader
Reveals His Secrets

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

CUMMINS INDIA SHARE PRICE


Jun 16, 2021 (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 - BATLIBOI COMPARISON

COMPARE CUMMINS INDIA WITH

MARKET STATS