Cummins, Lupin, Shree Cement, Gujarat Gas, Aditya Birla Fashion, Dr. Lal Pathlabs Q1 Review: HDFC Securities

HDFC Securities Institutional Equities

Cummins - Robust demand; positive outlook

Cummins India Ltd. reported in-line/below performance vs. consensus/our estimates with revenue/Ebitda/adjusted profit after tax missing our estimates by 7/13/12%. Domestic business grew 12% YoY whilst exports declined 22% on the back of weak overseas demand. CPCB 4+ implementation seems to be a game changer as it forces demand to move from commodity players to technology players and opens up service opportunities.

Supply chain issues seem to have smoothened, channel inventory is low and higher margin CPCB 4+ share is expected to ramp up significantly from 40% to 75% in coming quarters.

Cummins maintained a two times real GDP growth guidance band of 12-16% over the longer term with a positive margin bias. The company has multiple tailwinds, namely, stringent emission norms, capex cycle recovery, adoption of alternative fuels with lower carbon footprint, revival in industrials and exports, and support for manufacturing policies.

We maintain Buy, with an increased SOTP of Rs 4,658 (54 times Sep-26 EPS).

Lupin - Strong Q1; steady U.S. / India growth, margin to normalise

Lupin Ltd.'s Ebitda growth (+59% YoY) was led by 16% YoY sales growth (US: +9% QoQ and India +18% YoY), higher gross margin (+293 bps), and steady costs (staff/research and development/selling, general and administrative: +15/ -5/ +13%). Lupin expects-

1. the US to see high-single-digit growth in FY25 ($220-230 million per quarter) due to traction in gSpiriva (with market share expected to improve from ~30%) and new launches, sustained growth in FY26;

2. India to outperform IPM growth by 20-30%;

3. gross margin margin to sustain at 68%+ and Ebitda margin to normalise in FY25, aspiring to achieve 22-23% in the mid-term; and

4. R&D to be at Rs 18 billion and the ETR at 20% in FY25.

Factoring in the Q1 beat, we raised our EPS by 19/7% for FY25/26E and revised target price to Rs 1,950 (28 times Q1 FY27E versus 26 times earlier). Reduce stays. While growth visibility led by growth in the US (gSpiriva, and recent/new launches— gMyrbetriq, gJynarque), India (new launches and traction in key therapies) and improving margin (sales growth and cost optimization) are intact, this has been already rewarded with the run-up of ~85% in price in the last 12 months.

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