Target: ₹4,300

CMP: ₹3,833.95

From our recent interaction with the management, Cummins India (KKC) appears to be well positioned to benefit from the change in emission norms for diesel gensets. The CPCB 4+ norms have been in effect since 1st Jul’24.

Contrary to expectations, demand has so far remained strong despite price hikes of 15-35 per cent across nodes. This demand is being led by the refueling of channel inventory with CPCB 4+ gensets. KKC is striving to maintain high margins as experienced during the last few quarters through cost-rationalisation measures and an improved product mix. The industrial segment is benefitting from the strong construction cycle, and the distribution segment is gaining from better market reach.

Exports appear to have bottomed out and could witness improvement in the coming quarters.

We thus maintain our positive stance on KKC and reiterate our Buy rating on the stock with an unchanged TP of ₹4,300 (based on 45x P/E on two-year forward earnings).

Key risks to our recommendation would come from lower-than-expected demand for key segments, higher commodity prices, increased competitive intensity, and a lower-than-expected recovery in exports