Microsec re-initiates Buy rating on Cummins India

We recommend Cummins India Ltd (CIL) a "BUY". We had earlier recommended Cummins India Ltd a "BUY" at INR462 in our report dated 29th March, 2012 with a Target price of INR537. The stock had surpassed our target price of INR537, giving a return of 16% on 3rd January, 2013.

We are re-initiating the stock at current level on account of strong growth in domestic revenue supported by powergen business and recovery in industrial business, growth in exports though in low teens, volume growth due to prebuying on change of emission norms, 15-20% price hike post emission norms, and stable margins due to its cost control efficiencies.

At the current price of INR459, the stock is trading at adjusted P/E of 17.23x its FY14e EPS and 15.67x its FY15e EPS. We believe that CIL will continue to enjoy premium valuations due to its dominant market positioning, impressive long-term growth outlook, healthy balance-sheet, strong ROE as compared to its peers and dividend yield of 2.83%.

Source : Equity Bulls

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