Buy Cummins India - 3QFY11 concall - Motilal Oswal

CUMMINS INDIA: 3QFY11 concall takeaways; Domestic sales down, exports up; Growth to pick up in 4Q; Buy

During the quarter, domestic sales stood at Rs7b, down 6% YoY and 12% QoQ. Sales during the quarter were partly impacted by maintenance shut down.

For 9MFY11, domestic sales stood at Rs22b, up 20% YoY.

With growing power shortage, diesel engine demand for power-generation application (50% of domestic sales) will continue to be strong.

Expect strong demand for industrial engines, auto-engines and services. We see domestic demand growing at 31% for FY11, 20% for FY12, and 19% for FY13.

Cummins’ strong growth in India will be aided by leadership across product ranges, growing focus on quality, and extensive sales and service network.

We are cutting our FY11 and FY12 revenue estimates by 2% and 4%, in light of lower domestic sales. We cut FY11 and FY12 EPS estimates by 7% and 12%. We expect Cummins to clock revenue and PAT CAGR of 22% and 25% through FY11-13E with constant EBITDA margins of 20%. Maintain Buy rating with a revised target price of Rs800 (earlier Rs900) on 20x FY12E earnings.

Source : Equity Bulls

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