Cummins India - Witnessing A Smoother Transition To New Norms: Motilal Oswal

Motilal Oswal Report

From our recent interaction with the management, Cummins India Ltd. 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 July 01, 2024.

Contrary to expectations, demand has so far remained strong despite price hikes of 15-35% across nodes. This demand is being led by the refueling of channel inventory with CPCB 4+ gensets.

Cummins 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 Cummins and reiterate our Buy rating on the stock with an unchanged target price of Rs 4,300 (based on 45 times price/earnings on two-year forward earnings)

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