Cummins India numbers have likely troughed and should improve incrementally; (2) capacity has been created for next three years and facilities are operating at low utilizations of 50-60%, which implies when demand comes back, margins can expand 250-300bps over
next three years on operating leverage; (3) post the technological speed bump of CPCB stage II implementation (July 1, 2014) Cummins – the market leader – should become even more entrenched and will be difficult to dislodge; and (4) the outcome of General Elections 2014 bolsters our capex rebound and GDP acceleration thesis from FY16E.
Cummins India is expected to report an EPS of Rs 25, 30 and 35 for FY 15,16, 17 respectively. HOLD the Stock
