Neutral on Cummins India - Motilal Oswal

Profitability supported by cost optimization measures

- High capex to dilute returns, 60 L engine is INR2.6b opportunity in 5 years

- Profitability supported by cost optimization - a widening moat

- Expect meaningful increase in capex at INR6.5b each in FY13/FY14 v/s INR2.1b in FY12

- 60-liter engine has revenue potential of INR2.6b over 5 years, construction commences at Phaltan SEZ

- Liquidity crunch and slowing global economy likely to impact growth in 1HFY13

- Valuation and view: KKC currently trades at 9% premium to its LPA P/E whereas the capital goods sector is at a 9% discount to its LPA P/E. Such rich valuations leave little room for disappointments. Maintain Neutral.

Source : Equity Bulls

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