Cummins

Cummins has continued to report strong earnings traction in a relatively weak economic scenario. Cummins India is a 51 per cent subsidiary of Cummins Inc USA. India´s leading manufacturer of diesel and natural gas engines, Cummins India is one of the eight legal entities of the Cummins Group in the country. Comprising four business units - Industrial Engine, Power Generation, Distribution, and Automotive, the company is also the largest entity of the Cummins Group in India. It has maintained its dominance in the market in the field of diesel power generators. Over the past few years, Cummins India has seeded various growth levers (like low horsepower (LHP) gensets for domestic or exports, reconditioning and refurbishment, etc). Over the last six years (FY10-15), sales have grown at a CAGR of 8.72 per cent and the company has maintained high ROE ranging from 25 to 35 per cent despite adverse market conditions. For FY15, sales were up by 10.8 per cent to Rs 4,321 crore. Exports sale grew by more than 30 per cent to Rs 1,750 crore. Bottom-line jumped by 31 per cent to Rs 786 crore in FY15. It is believed that as the economic growth momentum picks up on the back of investment cycle pick-up, the company could be among the biggest beneficiaries in its sector owing to its strong competitive positioning, superior brand recall, strong parentage and solid product innovations. Cummins is still running at around 60 per cent capacity utilisation, and thus, incremental capacity utilisation could help improve the margin profile of the company in the long term.