Earnings Outlook
Cummins India Oct-Dec PAT growth seen slowest in 10 qtrs
This story was originally published at 18:10 IST on 3 February 2025
Register to read our real-time news.Informist, Monday, Feb. 3, 2025
By Aman Aryan
MUMBAI – Higher realisation due to the increase in prices of Central Pollution Control Board IV+ generator sets and strong growth in the distribution segment is expected to drive Cummins India Ltd.'s earnings for the December quarter. However, muted volume, expected price cuts in the low horsepower segment, and some cost pressures are likely to drag down growth in the net profit to the lowest in 10 quarters.
The diesel and natural gas engine and generator sets manufacturer's net profit for the December quarter is seen up 5% at INR 4.78 billion, according to an average of estimates from 10 brokerage firms. While Mirae Asset Sharekhan Ltd. gave the lowest estimate for the company's net profit of INR 4.12 billion, HDFC Securities Ltd. had the highest estimate of INR 5.30 billion. The company will detail its earnings on Wednesday.
Cummins India is expected to report a 6% on-year increase in its revenue to INR 26.91 billion, according to an average of estimates from 10 brokerage firms. The estimates for the company's revenue range from INR 22.80 billion by Mirae Asset Sharekhan to INR 29.14 billion by Nomura Elara Securities (India) Pvt. Ltd. Of the 10 estimates, only Mirae Asset Sharekhan and IDBI Capital Market Services Ltd. expect the company's revenue to fall during the December quarter. Sequentially, the net profit and revenue for the quarter under review are expected to rise 6% and 8%, respectively.
The company would have likely seen a moderation in volumes as the market adjusted to the price increases in the Central Pollution Control Board IV+ regime, IDBI Capital said. However, an expected 20-40% increase in prices of the new power generator sets would have likely mitigated the impact of volume decline to a large extent, the brokerage added. IDBI Capital expects Cummins to report a 2% on-year fall in revenue due to a slowdown in volume.
High base and price cuts in the low horsepower generator portfolio would have also likely affected the company's earnings for the December quarter, according to Kotak Institutional Equities' earnings preview report. Nomura Global Market Research expects the power generation segment to post a 9% on-year fall in revenue on an unfavourable base. Demand for power generator sets was initially impacted in October and November for low-to-mid kilovolt-ampere nodes but has now started to recover, Motilal Oswal Financial Services Ltd. said.
On other hand, the company's distribution segment is expected to see a 13% on-year growth in the December quarter, Nomura said. Both Motilal Oswal and Nomura expect an over 40% increase in Cummins' exports for the quarter. The power generator company is expected to report earnings before interest, tax, depreciation, and amortisation of INR 5.36 billion for the December quarter, according to an average of estimates from nine brokerage firms.
Cummins' EBITDA margin is likely to contract 40 basis points from the year-ago quarter due to higher other expenses, Prabhudas Lilladher said. The margin is expected to stay above 19%, led by strong growth in the distribution segment, a 6% fall in pig iron prices, and some cost-reduction measures, Nomura said.
The engine maker had launched a variety of power solutions built on its HELM platform aimed at lower emissions and improved productivity. It launched the next generation of its L10 engine, hydrogen fuel delivery system, and the B6.7N natural gas engine at the Bharat Mobility Global Expo 2025.
Analysts have advised investors to monitor the company's demand outlook for higher priced Central Pollution Control Board IV+ generator sets as it may give medium-term hiccups. With other players launching their Central Pollution Control Board IV+ products, investors will also watch out for pricing dynamics across nodes, Motilal Oswal said.
On Monday, shares of Cummins closed 3.5% lower to almost an 11-month low at INR 2,700.70 on the National Stock Exchange. The stock is down 26% from the closing price on Nov. 8, a day after it released its earnings for the September quarter after market hours. Of the 10 brokerage reports on the company available with Informist, six have a 'buy' or equivalent rating on the stock, two have a 'hold' or equivalent rating, and the other two have a 'sell' or equivalent rating.
Following are the Oct-Dec earnings estimates for Cummins India based on reports compiled by Informist from 10 brokerages in descending order by the estimate of net profit:
| Brokerage Firm | Net Sales | Net Profit | EBITDA |
| ----(in INR million)----- | |||
| HDFC Securities Ltd. | 28,700.00 | 5,300.00 | 5,900.00 |
| Prabhudas Lilladher Pvt. Ltd. | 28,107.00 | 5,158.00 | 5,762.00 |
| Elara Securities (India) Pvt. Ltd. | 29,139.00 | 5,152.00 | 5,692.00 |
| Nuvama Wealth Management Ltd. | 28,328.00 | 4,957.00 | 5,524.00 |
| Kotak Institutional Equities | 27,132.00 | 4,747.00 | 5,138.00 |
| Motilal Oswal Financial Services Ltd. | 26,881.00 | 4,694.00 | 5,242.00 |
| Nomura Equity Research | 27,300.00 | 4,630.00 | 5,217.00 |
| JM Financial Institutional Securities Pvt. Ltd. | 25,881.00 | 4,538.00 | 5,053.00 |
| IDBI Capital Market Services Ltd. | 24,831.00 | 4,523.00 | 4,686.00 |
| Sharekhan Ltd. | 22,800.00 | 4,120.00 | ---- |
| Average | 26,909.90 | 4,781.90 | 5,357.11 |
End
Edited by Akul Nishant Akhoury
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