Cummins India’s (KKC) Q4FY10 results were in line with our estimates. Ex-CSS (Cummins Sales and Service India), KKC reported subdued sales growth at 5.3% Y-o-Y to INR 6.7 bn during the quarter. Operating profit grew a strong 49.5% Y-o-Y to INR 1.3 bn with an operating margin of 19.2% (13.5% in Q4FY09). For FY10, revenue stood at INR 23.4 bn, a 19% decline, and operating profit margin was at 18.6%, up 280bps over the previous year. Though standalone revenue was below estimate due to weak exports, PAT was in line with our estimate due to margin expansion during the quarter. For the full year, though standalone revenue dipped 14.3% to INR 28.9 bn, EBTIDA margin expanded significantly (366bps over FY09). KKC reported growth of 4.9% in EBITDA to INR 5.8 bn due to strong operating performance and cost saving measures undertaken by it. The company reported PAT growth of 7.1% to INR 4.4 bn during the year. Exports during the quarter were weak; they declined 40% Y-o-Y to INR 1.8 bn, but rose sharply Q-o-Q by 116%. The domestic business, however, continued to support total revenue, which grew 49% Y-o-Y to INR 4.7 bn during Q4FY10.
Edelweiss said,
EPS estimates of INR 24.6 and INR 27.7 the stock is trading at a P/E of 22.6x and 20.1x for FY11E and FY12E, respectively. We maintain our ‘BUY’ recommendation on the stock and rate it ’Sector Outperformer’ on relative return basis.
Merrill in a report said,
We have raised PO by 16% to Rs620 driven by (1) increase in FY12e EPS by 8% led by higher exports; (2) rise in target PER by 9% to 16.3x FY12e owing to higher ROE and value of JVs.
