2 CUMMINSIND share price target reports by brokerages below. See what is analyst's view on CUMMINSIND share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
Downgrade to Sell, with lower TP of INR330: We downgrade Cummins to Sell with lower TP of INR330 (from INR360) as we lower our target multiple to 15x from 16x earlier. We acknowledge that despite macro headwinds, the company has done a commendable job in FCF conversion, resulting in a strong balance sheet. Rental and dividend incomes have enabled the company to significantly increase dividend payouts over the years, owing to which it has one of the best payout ratios in the Capital Goods sector. However, the lack of growth drivers is yet to be fully factored in the valuations, in our view
Cummins India (KKC) reported a mixed bagged performance with higher other income and lower effective tax rate leading to a positive surprise on profitability. However, operational performance was weak on account of weak economic environment and impact of Covid-19 Pandemic. Domestic/Exports revenues declined 22%/21% YoY, for the quarter. Management indicated that the current scenario in domestic markets would continue for next 3-6months. They indicated data centers, hospitality, telecom, critical power, railways would help to drive domestic growth. Further, exports market would remain weak due to global economic challenges and will likely revive from 2H onwards based on improved demand environment. We believe that KKC would significantly impact in 1HFY21E due to nationwide lockdown and consequential impact on the economy. We remain cautious on account of a) deepening slowdown in the export markets, b) demand recovery to pick-up gradually and c) Working Capital Stress with higher inventory levels. The stock is currently trading at 19.3x/17.2x FY21E/22E. Given current scenario and correction in stock price by ~40-50% plus over last 2 months, we believe risk reward is highly favorable for the stock and expect to give reasonable returns in the long run. We maintain BUY on the stock with a TP of Rs472.
Cummins continues to face structural issues like weak demand, reduced pricing power, and volatile overseas business impacting EBITDA margins. In the last decade, EBITDA margins dropped from 19% in FY11 to 15% in FY19 and for next two years it may remain lower than FY19 level. Hence, we maintain ‘SELL’ rating on Cummins by valuing it at 21x FY21E earnings for a target of Rs. 545. Key upside risk to our call is margin expansion due to cost control measures.
KKC management has further lowered its overall revenue guidance with domestic revenue growth guidance from 8- 10% to 3-5% and de-growth of 20% from 12-15% in exports for FY20. We have cut EPS estimates by FY20/21E by 11%/17% for Cummins on account of a) weak 1HFY20 reported earnings, b) deepening slowdown in the export markets and c) delay in domestic recovery. The stock is currently trading at 24x/22x FY20/21E. We maintain Hold rating with revised TP of Rs543 (22xFY21E).
On the exports, challenges continued in various geographies with ME and Africa witnessed 50% reduction demand, Brazil - 30%, China -20%, Europe -30% and UK -20% YoY. ME and Africa combine contribute 30% of export sales. KKC management has further lowered its overall revenue guidance with domestic revenue growth guidance from 8- 10% to 3-5% and de-growth of 20% from 12-15% in exports for FY20. We have cut EPS estimates by FY20/21E by 11%/17% for Cummins on account of a) weak 1HFY20 reported earnings, b) deepening slowdown in the export markets and c) delay in domestic recovery. The stock is currently trading at 24x/22x FY20/21E. We maintain Hold rating with revised TP of Rs543 (22xFY21E).
Over the next five years, management indicated of new trend lines viz. infrastructure spend by the government, Emissionized Products, Alternate fuels, Digitization and Connectivity. The company is fully geared up for launching new CPCB IV+ products which are expected to be launched in India by 2020-21. We expect CIL to deliver earnings CAGR of 4% over FY19-21E. The stock is currently trading at 23x/20x FY20/21E and we maintain Hold rating with TP of Rs619 (22x FY21E).
Lowering earnings estimate and TP; maintaining Buy on cheap valuations:We cut our earnings estimate by 13%/11% for FY20/21 to factor in (a) the pressure on margins, given intense competition in the domestic business and (b) the weak exports outlook. We scale down our TP to INR695 as we assign a target multiple of 24x FY21E EPS. At CMP, the stock trades at FY20/21E P/E of 24x/21x. We maintain Buy given cheap valuations.
Disappointing quarter, full year guidance cut Cummins India (KKC) reported one of its weakest quarterly performance with flat sales and ~490bps YoY dip in EBITDA margin in Q1FY20. While domestic sales up 16% YoY, exports fell sharp 26%YoY at Rs3.3 bn (much lower than earlier guidance). With weak Q1FY20 performance and expectations of further weakness, KKC management has lowered its overall revenue guidance with reducing domestic revenue growth guidance from 10-15% YoY to 8-10% and de-growth of 12-15% in exports (earlier guided for flat to marginal decline) for FY20. Powergen and Distribution business is holding up well but the industrial part of the business has been weak due to slowdown in the construction and mining end-market. Construction segment was affected largely due to financial crunch and monsoon effect. During the quarter export markets like Middle east, Africa and Asia (excluding China) have seen decline of 25-30%. KKC is seeing weak demand from exports markets amid uncertain global growth and volatile forex markets. We have cut EPS estimates by 13% each for FY20/21E, factoring weak demand outlook. The stock is currently trading at 25x/22x FY20/21E. We have downgraded the stock to Hold from Accumulate with revised TP of Rs619 (22xFY21E).
CIL continues to benefit from improving government spend on infrastructure while weak global cues may continue to put pressure on the overall margins of the company. Currently, CIL is trading at a P/E of 23x and 21x on FY20E and FY21E EPS. Our Target of Rs792 implies 24x on FY21 EPS and revise our rating to Hold from Accumulate.
We revise down our earnings estimate for FY20/FY21 by 8.5%/10.8% on theback of higher mix of low margin domestic businesses and lower exports whichimpact EBITDA margin by 118 bps/142 bps than our earlier estimate. We maintain‘HOLD’ rating on Cummins by valuing it at 26x FY21E earnings for a target price of Rs. 844. Key upside risk to our call is exports growth and key downside risk is adverse product mix which could dent margins further. Unveiling of new emission norms in India for gensets could assure in pricing power to players with technologies and competitive intensity could be higher which now is unclear and we are yet to price in the same in estimates.
We cut our earnings estimate by 8%/6% for FY20/21E to factor in (a) pressure on margins, given the intense competition and inability to take price hikes, and (b) muted exports outlook. We maintain Buy with a TP of INR910 (28x FY21E EPS, in line with its 10-year average multiple).
We have increased FY20/FY21 sales estimates by 2%/3% to factor in the strong traction from domestic industrial segment. Margins are expected to remain flat in FY20 as regular price hikes & cost rationalization measures to offset for lower contribution from the high margin exports business. We assign ‘ADD’ rating with TP of Rs832 at 23x FY21E EPS. We expect KKC to deliver sales/EBITDA/PAT CAGR of 13%/14%/16% respectively over FY19-21E with average ROE of 20%+.
he company has guided for domestic revenue growth of 10-15% YoY for FY20. KKC expects good growth in HHP segment mainly driven by data center, commercial realty, manufacturing etc. KKC is seeing weak demand from exports markets amid uncertain global growth and volatile forex markets. We have modelled 10%/11% Revenue/PAT CAGR over next two years (FY19-21E). The stock is currently trading at 27/23x FY20/21E. We maintain our Accumulate rating on the stock with TP of Rs841 (26xFY21E).
We are positive with a long-term view on the stock given its market leadership in the HHP and MHP segment, strong after-sales service & distribution, and its preparedness to take advantage of the upcoming CPCB4 emission norm change. Exports is still a bleak spot in the near term given the decline in demand for HP engines from its parent. But, we are upbeat on the long-term prospects of Exports as we expect capex cycle recovery in the key markets of Europe and Africa, post firming up of oil and base metal prices. We maintain a Buy rating on the stock with target price of INR950 (28x Dec’20 EPS of INR34).
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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