Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cummins India — Slowing down
Country Overview
Downgrading to Underperform
Following 13% earnings miss in Q1 FY12E, we cut our PO 21%, to Rs600 and
rating to Underperform, driven by (1) revision in EPS forecasts 8% in FY12E and
14% in FY13E, and (2) lowering of the target P/E from 17.5x to 16x FY13e. Postrevision,
we expect profit growth of just 12%, owing to domestic slowdown.
Q1FY12 disappointed on domestic sales
Cummins India Q1FY12 recurring net profit at Rs1.4bn was flat y-o-y and was
13% below our estimate. Key negative was domestic revenue growth of 8%
compared to 25% sales growth expectation mentioned by the company in May
2011. The company has been affected by macro slowdown owing to sharp rise
interest rate in last two months that has possibly led to deferral of large projects
like shopping malls leading to weaker diesel genset sales.
Margin has stabilized, but unlikely to improve
EBITDA margin at 17.8% in Q1FY12 though has fallen 350bp y-o-y, but has
remained at around previous six-month level. However, company is comfortable
with current margin level and does not see much improvement even though it will
continue its cost reduction initiatives. Slower genset sales could in fact lead to
lower margin owing to worsening of product mix.
Valuation could de-rate on slower growth
Cummins India is currently trading at PE of 18.5x FY12e and 16.5x FY13e. The
stock has traded at an average PE of 13x in the past during phases of such
slower growth. At our PO the stock would trade at PE of 13.5x FY13e after
adjusting for the value of its investment in associate companies.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cummins India — Slowing down
Country Overview
Downgrading to Underperform
Following 13% earnings miss in Q1 FY12E, we cut our PO 21%, to Rs600 and
rating to Underperform, driven by (1) revision in EPS forecasts 8% in FY12E and
14% in FY13E, and (2) lowering of the target P/E from 17.5x to 16x FY13e. Postrevision,
we expect profit growth of just 12%, owing to domestic slowdown.
Q1FY12 disappointed on domestic sales
Cummins India Q1FY12 recurring net profit at Rs1.4bn was flat y-o-y and was
13% below our estimate. Key negative was domestic revenue growth of 8%
compared to 25% sales growth expectation mentioned by the company in May
2011. The company has been affected by macro slowdown owing to sharp rise
interest rate in last two months that has possibly led to deferral of large projects
like shopping malls leading to weaker diesel genset sales.
Margin has stabilized, but unlikely to improve
EBITDA margin at 17.8% in Q1FY12 though has fallen 350bp y-o-y, but has
remained at around previous six-month level. However, company is comfortable
with current margin level and does not see much improvement even though it will
continue its cost reduction initiatives. Slower genset sales could in fact lead to
lower margin owing to worsening of product mix.
Valuation could de-rate on slower growth
Cummins India is currently trading at PE of 18.5x FY12e and 16.5x FY13e. The
stock has traded at an average PE of 13x in the past during phases of such
slower growth. At our PO the stock would trade at PE of 13.5x FY13e after
adjusting for the value of its investment in associate companies.
No comments:
Post a Comment