Cummins India shares decline despite impressive Q4 results; check what brokerages suggest

Shares of Pune-headquartered leading power solutions provider Cummins India traded weak after the company released its March quarter earnings on Wednesday. At the last count shares of the company traded weak by 1.7 per cent at Rs 3,769.25, while at day's low it hit levels of Rs 3763.60, a drag of 1.85 per cent from the previous close.

On a standalone basis, the company registered a 20 per cent uptick in sales on-year to Rs 2,269  crore, nevertheless on a sequential basis the sales were weak by 9 per cent during the quarter under review.

Profit after tax recorded growth both on a year-on-year basis as well as sequential basis by 76 per cent and 23 per cent, respectively and came in at Rs 562 crore.

Domestic sales too took a hit 12 per cent sequentially and rose 38 per cent on year to Rs 1,925 crore, while export sales inched lower on-year by 30 per cent to Rs 344 crore, while the same was higher by 6 per cent compared to the previous quarter.

“The company recorded another year of record revenue and profit, driven by strong demand from the domestic market while export market demand was soft. The Company launched the CPCB IV+ range of products, which were very well received by customers. The company continues to have a strong balance sheet and liquidity and is well-positioned to support its operations and growth plans,” said Ashwath Ram, Managing Director, Cummins India Limited.

On the future outlook, the company remarked that in the Powergen Market, CPCBII products can be sold until June 30, 2024. Consequentially, the market will see a demand shift to CPCB IV+ emission norms-compliant products effective July 1, 2024. The company has a strong portfolio of CPCB IV+ emission norms-compliant products 

Exports might see an impact in the near term due to global economic uncertainties. The company closely monitors the results of geopolitical events unfolding in different parts of the world and their impact on global demand and supply chains, it added.

Should you buy, hold or sell Cummins India shares after the Q4 show?

Macquarie has suggested an ‘outperform’ view on the counter with a target of Rs 3600 per share. The brokerage said that the company ended the financial year 2024 on a healthy note with strong domestic business growth. While exports remained subdued, margin 
expansion was aided by gross margin expansion & other lower expenses.

Nomura, on the other hand, has maintained a ‘neutral’ view on the stock with a target of Rs 3,040. The given target signals a possible downside of 21 per cent from the stock’s last closing price. It said that the diesel engines company recorded a PAT beat of 51 per cent in comparison to its estimates. Furthermore, EBITDA margin at 23.5 per cent during the quarter came in as a positive surprise which it attributed to higher growth in the High HorsePower (HHP) segment, retention of pricing power, & correction in pig iron prices.