Cummins India: Operating Performance Disappoints; Outlook Remains Weak

Cummins India's operating performance disappoints and outlook remains weak, Motilal Oswal has said in its latest report on the company.

Cost-cutting measures may not be enough to offset weak demand

"Cummins India's 4QFY20 operating performance nosedived, weighed by decline in revenues, coupled with higher fixed cost. Higher other income and a lower tax rate in FY20 led to lower decline in PAT at 13% YoY. While domestic sales in FY20 were down 3% YoY, exports de-grew much sharper at 20% YoY.

Cummins has refrained from giving guidance as it is still assessing the COVID-19 impact and operations are yet to normalize. Recovery in the export markets is key for revival in the company's margin and growth trajectory. We cut our FY21E estimate by 12% to factor slower recovery, but maintain our FY22 estimates. Our revenue / EBITDA / adj. PAT CAGR over FY20-22E stands at 4%/10%/-2%. Maintain Neutral, with unchanged target price of Rs 360," Motilal Oswal has said in its report.