Cummins India - Strong earnings growth continues - Avendus

High earnings growth in the Dec12 quarter was aided by a low revenue base, sharp fall in overheads and lumpy other income. Outlook on demand recovery stays subdued, reflected in the flat volume growth guidance for FY14. The commodity price rise and new factory overheads may restrict a further EBITDA margin increase.

CPCB normrelated pricing disruptions and sharing of the parent's overheads pose unknown risks to future margins. We raise the FY13f EPS by 11% on higher EBITDA margins, while the FY14f-FY15f EPS is largely unchanged after factoring in a slow demand pickup.

We rollover our TP to Dec13 and raise it to INR515 based on 18x P/E. Upgrade to Hold.

Source : Equity Bulls

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