SMC Global Securities has a buy call on Cummins India with a target price of Rs 983
Net sales of the company stood Rs 1,452 crores, which grew by 30 per cent YoY. Net profit before tax was at a record high of Rs 298 crores which came 53 per cent higher YoY. The company saw its margins improve by 1.5 per cent due to forex gains, cost control and better realizations. Ebitda margins stood at 16.9 per cent.
Risk: Increasing competition and commodity price fluctuation.
Valuation: In this quarter, the company was able to overcome certain execution constraints that it had encountered in the previous quarters. The management is confident on the medium to long-term outlook for domestic sales as underlying demand remains positive, arising from sustained investments by the government in creating infrastructure for the Indian economy. The company is positioned to outperform in the industry and is investing judiciously in product enhancements, increasing customer focus while maintaining strong controls over the cost of operations and improved productivity. It is expected that the stock will see a price target of Rs 983 in 8 to 10 months time frame on a target P/E of 31 times and FY20 EPS of Rs 31.7.
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