Cummins India (KKC IN) (Neutral) - Fully priced in; downgrade to Neutral

研报英文原文证据摘录

Cummins India (KKC IN) (Neutral) - Fully priced in; downgrade to Neutral

ations widen the customer base.

Near-term GM headwinds as commodity inflation may outpace pricing actions

Pig iron/copper (~75% of material costs) prices have risen 20%/40% y-y in 1QFY27 so far. We

Source: LSEG, Nomura

believe the 8-10% price hike suggested by our channel checks, while appropriate, appears insufficient to

fully offset input cost headwinds. Thus, margin drag is likely in 1HFY27F and further GM compression is

possible if commodity prices remain elevated (Fig.12). In our view, while cost controls and operating Research Analysts

leverage provide partial mitigation, the GM recovery will likely require commodity price moderation, further India Capital Goods

selective pricing, and favorable mix – conditions that may take a few quarters to materialize. Umesh Raut - NFASL

umesh.raut@nomura.comTrades at 52x FY28F EPS; downgrade to Neutral with a revised TP of INR6,000 +91 22 403 74035

We cut our FY27F EPS estimate by 2% to factor the short-term GM headwinds while our FY28F

Aritra Banerjee - NFASLEPS esimate remains unchanged, and introduce FY29F earnings estimates. Post a 104% rally in its

aritra.banerjee@nomura.com

stock price, KKC currently trades at 52x FY28F EPS, implying limited room for upside. We +91 22 672 34609

downgrade KKC to Neutral and roll forward our valuation to Jun’28F earnings, leading to a higher

SoTP-based TP of INR6,000 (INR4,780 earlier) (Fig.7), implying a target P/E of 49x (increase in

implied target P/E multiple [from 42x] is led by large DC prospects).

Year-end 31 Mar FY26 FY27F FY28F FY29F

Currency (INR) Actual Old New Old New Old New

Revenue (mn) 121,432 138,962 139,929 160,033 161,388 0 193,352

Reported net profit (mn) 23,803 27,157 26,513 31,825 31,941 0 50,977