Cummins India: Maintaining Positive Stance

Company Overview

We reiterate our positive stance on Cummins India (CKC) following a recent meeting with management. The company continues to benefit from various growth drivers, including healthy demand momentum in the powergen segment, strong growth opportunities from the fast-growing data centre market, improving demand for the industrial segment, a higher installed base for distribution, and improving trends in exports.

Key Growth Drivers

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1. Powergen Segment: Healthy demand momentum, coupled with strong growth opportunities from the data centre market.
2. Industrial Segment: Improving demand, following slower capex in 9MFY26.
3. Distribution: Higher installed base and improving trends.
4. Exports: Improving demand.

Capacity Utilization and Expansion

Cummins India has localized 70-80% of CPCB 4+ genset requirements, enabling easy expansion of capacity to cater to increased demand requirements.

Estimate Revisions

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We revise our estimates upwards by 5% for FY27 and 7% for FY28 to reflect better demand for HHP, distribution, and improved margins on a better product mix.

Recommendation

We reiterate a BUY rating with a revised Target Price (TP) of INR 5,500 based on a 45x multiple of Mar'28 earnings. We have increased our multiple from 42x to 45x, factoring in the stronger data centre demand outlook and the company's ability to capitalize on it, supported by its market leadership in the segment.