Initiating Coverage Report Cummins India LTD: Recommendation: BUY

InitiatingCoverageReport
CUMMINSINDIALTD
Recommendation:BUY
CurrentPrice:`462
Targetprice:`537
Analyst:NehaMajithia
namjithia@microsec.in
+03330512100
CumminsIndiaLimited
SectorCapitalgoods
BUY
WerecommendCumminsIndiaaBUY.CumminsIndiaiscountrysleadingmanufacturerofDieseland
GasEngineswithstrongfoundation,unmatchedtechnology&products,scaleandtimetestedstrategies.
ThecompanydoubleditsrevenueinthelastfiveyearstoINR3945.44croresandispoisedtogrowata
CAGR of 14% for the next five years. Cummins India would make headway from the operations at
Megasite at Phaltan in coming years which would foster the margin back to the historic levels and
contributearoundadditionalofINR1500croresto therevenuesby2015.
InvestmentHighlights
15.81%
51%
33.19%
ForeignPromoters
IndianPromoters
Institutions
NonInstitutions
StockScan
ScripID
CumminsIndiaLtd
ScripCode(NSE)
CUMMINSIND
ScripCode(BSE)
500480
KKCIN
BloombergTicker
ReutersTicker
CUMM.BO
Industry
CapitalGoods
FaceValue
INR2.00perShare
EquityShareCapital(INRCr)
55.44
Avg5yearsP/E
19.83
Avgdailyvolume(Last1Year)
189,072
BetaVsSensex
0.68
DividendYield
6.02%
PEGRatio
SubstantialRevenuegrowthdespitemultipleheadwinds:Despiteofhighinterestratesandcommodity
pricescoupledwithuncertainglobalenvironment,thecompanyhasbeengrowingataCAGRof16.47%
forthelast5years.ItispoisedtogrowataCAGRof14%forthenext5yearswithimprovedoutlookon
export demand and substantive growth across all segments, particularly in segments like power
generation and industrial business which contribute around 45% and 20% to the total revenue
respectively.
Newproductstoaidtofuturegrowth;Marginsbottomingout:Cumminselasticityofadoptingthenew
technologyandusingthesameefficientlywillhelpthemarginstobottomout.Itwillsignificantlybenefit
fromtheenhancedproductsbuiltinwithnewemissionpowergenerationnormsandindustrialengines
due to superior product development capabilities. Hence, with the improving demand scenario and
correctionincommodityprices,therewillbeanupsideinEBITDAmargins,goingforward.
ExpansionatPhaltanMegasitetofuelCumminsfuturegrowthEngine:Cumminsiswellplacedwithits
expansioninitiativesatMegasite,Phaltan.Itconstitutesalmost10facilitiesintotal,outofwhich4are
operationalandremaingwouldbeoperationalby2016andcontributeadditionalINR1500crorestothe
overall revenue. The 2 operational facilities namely Upfit centre & MIDC SEZ would add up annual
capacityof20,000MW&51,000MWrespectively.
Power Generation Business to act as power booster: The company expects the Power generation
businesstogrowataCAGRof1215%%overthenextfiveyears.Thegrowthwillbemainlydrivenby1)
marketgrowth2)LHPexportopportunityatMIDCSEZ3)largerpenetrationinthedomesticLHPmarket
(though might come at lower margins) and 4) tapping the bio mass opportunity. The company
anticipatessomeprebuyingbehaviortoshowupbeforethechangeintheemissionnormsinJuly2013
whichwouldcontributeheavilytotherevenues.Cumminsisconfidentthatitwillbeabletopenetrate
themarketmuchbetterpostthenormchange,givenitstechnologyleadershipandreadinesswiththe
producttomeettherevisedneedsofthecustomers
CumminsCashenrichedandSteadyBalanceSheet:TheCompanyhasenoughcashtocarryonitsfuture
operationandexpansions.Ithasstrongbalancesheetwithhealthyreservesandlowdebt.
NA
-2Analyst:NehaMajithia,nmajithia@microsec.in,+03330512100
29thMarch2012
MicrosecResearch
CompanyProfile
Cummins India Limited (CIL), headquartered in Pune since 1962, is the countrys leading manufacturer of Diesel and Gas Engines for
Powergeneration,Industrial,AutomotiveandDistributionmarkets.CIListhelargestcompanyinCumminsGroupinIndia.Cumminshas
beenassociatedwithIndiansubcontinentforclosetofivedecades.ItisaconsolidatedsubsidiaryofCumminsInc.
ItstartedoffwithapartnershipbetweenKirloskarandCumminsin1962.But,inlate1997,Kirloskarssoldtheirownership;resultingin
CumminsInc.increasingitsstaketo51%andtherestbeingtradedonBSEandNSE.
CILhasmanufacturedmorethan2,52,000enginestilldateinitsmanufacturingfacilitiesinPune.PartoftheUS$13.2billionCummins
Inc.,CumminsinIndiaisagroupofeightlegalentitiesacross200locationsinIndiawithacombinedturnoverofINR8500croresand
employingcloseto11000individuals.
ManufacturingFacilities&itsCapacityUtilization
Engines
Installedcapacity
UtilizedCapacity
HHPEngines
25enginesperday
20enginesperday
8LtrEngineCseries
18enginesperday
70%ofInstalledcapacity
14ltrEngine
21engineperday
20ltrEngine
6enginesperday
K90ltrEngines
7enginesperday
LHPgensets
40000unitsperyear
Exports
15000gensetsperyear
UnderUtilized
Source:CompanyData,MicrosecResearch
29thMarch2012
MicrosecResearch
Industryoverview&OutlookwithrespecttoBusinessSegments
PowerGenerationOverview
10.0%
Cummin'smarketshareofEngines
80%
9.7%
1100
9.0%
8.0%
65%
1000
8.0%
6.7%
900
60%
50%
8.4%
50%
45%
801
779
735
717
6.90%
6.0%
672
700
35%
40%
27%
30%
30%
20%
10%
4.0%
500
266
300
10%
132
143
148
159
174
200607
200708
200809
200910
201011
100
0%
0.0%
InstalledPowerGenerationCapacityinGW
Source:CompanyData
2.0%
201112(E)
PerCapitaConsumptionofElectricityinkWh
GDP
Source:CompanyData,CEA,MOSPI
Indiacontinuestomoveonthepathofenhancingitspowergenerationcapacityfrom173GWattheendofFY201011to187.55GWtill
date.
InFY201011,Indiahasanaverageenergydeficitof8.5%withapeakdeficitof10.3%.PeakDemand/Supplygapcontinuedtobegreater
than13%inJan12,whileaveragedeficiteasedto9.3%from11.3%inDec11.
Thegovernmenthasdetailedplanstoreducethedemandsupplygap;shortagescontinuetoexist,duetodelayedexecutionofprojects.
Thepercapitaconsumptionofelectricityisexpectedtocross1000kWhby2012fromthelastreportedfigureof801kWhinFY201011.
97%ofallcapacityadditioninlastfewmonths(i.efromSept11toJan12),camefromCoalbasedpowerplants,underscoringimmense
dependenceonCoal.Coalsupplysituationcontinuestobeweaktoatleast39thermalpowerplants,astheyhavelessthan7daysofcoal
stock.However,thisisanimprovementfromDec11,when45powerplantshadlessthan7dayscoalstock.Coalbasedpowerplantshave
56%ofallinstalledcapacity,whileHydrohas21%bytheendofyear2011.
IndianDieselGenset(GeneratorSets)MarketOutlook:TheIndiangensetmarketfor152000kVAgensetsisexpectedtoincreasefrom
153305unitsinFY10to216750unitsinFY15EattheCAGRof7.2%.InFY15,itisestimatedthatoutofthetotaldieselgenset(15to2000
kVA)marketof216,750units,HHPandMHPdieselgeneratorsetswillcomprise1,300unitsand7,150units,respectively.
MarketDrivers&ChallengesfortheGeneratorSetIndustryinIndia:ThekeymarketdriversfortheGensetIndustryinIndiaarea)High
PeakDemandPowerShortageb)InvestmentsinLargeProjectsc)BackupPowerforCriticalFacilities.TheChallengesarea)HighDiesel
Pricesb)LowCostImportsfromChinac)ExpectedChangesinEmissionsNormsd)ShortageofDieselEnginese)PriceCompetitionfrom
UnorganizedSector
29thMarch2012
MicrosecResearch
OverallOutlook:Thepowersectorisintroublebecauseoffuelscarcity,sluggishapprovalsandlackofdistributionreforms, pricingissues
relatedtoimportedcoalforpowerprojects,delayinenvironmentandforestclearances,fundingproblems,worseninghealthofpower
distributioncompaniesandaproposaltoslapdutyonimportedpowerequipment.
AutomotiveIndustryOverview
ComparisionofAutomobileindustry&IIPgrowth
342155
350000
8.30%
TheMediumandHeavyCommercialVehicleMarketgrewby38%
in 201011 over the previous year. Rising interest rates, slowing
8.00%
300000
7.80%
industrial output, substantial increase in vehicle prices coupled

with highbase effect of previous years are the main factors
6.00%
244944
250000
4.00%
impacting growth in the sector. The Medium and Heavy CV

segment,whichtendstomorevulnerabletoslowdown,islikelyto
10.00%
322788
200000
4.20%
183495
4.00%
2.00%
experienceamuchlowergrowth.
0.00%
150000
In2010,asIndiatransitionedtoBSIVnormsin13metrosandBS
IIIintherestofcountry,Cumminsautomotivebusinesssupported
200809
200910
201011
Volumes
IIPGrowth(%)
201112(E)
OEMs in transitioning to the new emission norms with the right

productandtechnology.
Source:CEA,CompanyDataMicrosecResearch
OEMshavetakensuccessivepriceincreasestopassontheimpactofemissionnormschangesandincreaseincommodityprices.Therising
dieselpriceshavealsoimpactedtheoperatingeconomics,beingamajorpartofafreightoperatorscoststructure.Thiscoupledwithhigher
interest rates (averaging 13% at present for large fleet operators) have substantially increased the cost of vehicle ownership for fleet
operators.
DistributionOverview:
TheDistributionBusinessUnit(DBU)outlookforthecomingyearremainspositiveinviewofthecontinueduptrendinindustrialactivity,
demandsupplygapinthepowersectorandexpectedgrowthinservicesoverthecomingquarters.
Changingtechnology,productplatforms,fuelsandemissionsregulationscreatesnewbusinessopportunitiesofuniquesolutionsforDBU.
29thMarch2012
MicrosecResearch
IndustryOverview:
29thMarch2012
MicrosecResearch
CumminsALowCostProducer
TheCompanyhasalwaysbeenalowcostproducerasithasoptedfordifferentstrategieslikeACEII,TRIMS,andSIXSIGMA.
29thMarch2012
MicrosecResearch
BusinessSegments
IndustrialBusiness
Particulars
MarketOffering
KeyOEMsintheMarket
MajorCustomers
Mining
300HPto3500HPDieselenginesfor
earthmovingequipmentsdumptrucks,
dozers,excavators,loaders,shovels,
graders,pipelayers,surfaceminers,blast
holerigs,waterSprinklers,TyreHandlers,
CoalHaulers,PipeLayer,Cranes,FE
Loadersetc.IncludesOEM
Domestic:BEML,CAT,Telcon,
Revathi,L&TKansbahal,L&T,
Komatsu,TWL,Volvoetc.
Global:Komatsu,EuclidHitachi,Unit
Rig/Terex,Liebherr,O&Ketc.
CoalIndiasubsidiaries,SECL,NLC,TISCO,
SAIL,HCL,HZL,KIOCL,NMDC,Cement
Industries,Lignite,Ironore,copper,
Zinc,Limestone&othermines,Steel
plants,Irrigationprojects,Infrastructure
projects,quarries&Privatecontractors
likeEMTA,GSAtwaletc.
Construction
100HPto300HPDieselpoweredengines
forEarthmovingEquipment,Construction
Machinery&MaterialHandling
EquipmentsuchasExcavators,Wheel
Loaders,Compactors,MotorGraders,
Cranes,Dumpers,Pavers,Forklifts,
MobileCrushers&ConcreteMixers.
KeySegments:Roads,Bridges,Rail,
Ports,Airports,Irrigation&Power,
Granite&Marblemines,StoneQuarries.
Telcon,L&TKomatsu,JCB,Hyundai,
Volvo,CAT,TIL,TWL,Vectra(VAE),
Dynapac,LiuGong,SchwingStetter,
Wirtgen,L&TCase,TerexVectra,
Greaves,Escorts,ACELiuGong,
SchwingStetter,Wirtgen,L&TCase,
TerexVectra,Greaves,Escorts.
DGBR,MajorcontractorslikeL&T,ECC,
PunjLloyd,Jaiprakash,HCC,Gammon,
etc*Marble&granitecustomers,like
RKMarbles,JKMarblesGEMGranites
etc*CementcustomerslikeACC,
AmbujaCement,Lafarge,Ultratech,
ShreeCement,etc
Portable
Compressor
60HPto1600HPDieselenginesforwater
welldrillingrigs,portablecompressors,
stationarycompressors,blastholerigs,
refrigerationcompressorsetc.
AtlasCopcoIndiaLtd.,Doosan,Elgi
EquipmentsLtd.,KirloskarPneumatic
CompanyLtd.
Mines,constructionprojects,quarries,
withBorewelloperators,GovtPHE
departments,portablecompressorsetc.
Marine
50HPto2300HPformainpropulsionand
auxiliarygensets.Completelineof
propulsion,generatingsetsandauxiliary
powersolutionsfrom371900kW,
designedspecificallyforthechallengesof
commercialmarineapplications.
GRSE,GoaShipyard,SesaGoa,ABG
Shipyard,BharatiShipyard,Tebma,
MazagonDocks,Chowgule&Co.,
DempoShipping,
VipulShipyard,WestCoast
Shipyard,CochinShipyard.
IndianNavy,CoastGuard,IWAI,
ONGC,BargeOwners,Fishing
Trawlerowners,Shippingcompanies.
Commercial(Ports,shippingcompanies,
fishingcommunity,InlandWater
transport.etc)aswellasDefense(Navy,
CoastGuard)marketsegments.
29thMarch2012
MicrosecResearch
WaterWell
DieselpoweredScrewCompressors
(4501400cfm
/150500psi)forWater
WellRigs.
ElgiEquipments,Atlas,Copco,
KirloskarPneumatic,
RevathiEquipments,Doosan
PrivateWaterWellDrilling
Rigowners,Rigmanufacturers,Central
GroundWaterBoard/
DGS&D,StateAgencieslikePublicHealth
EnggDept,WatersupplyandSewerage
Board,Groundandminorirrigation
department.
Rail
240HPto3500HPDieselenginesfor
LocomotiveDieselHydraulic/Diesel
Electric,RailCars(DMU)Diesel
Hydraulic/DieselElectric,Track
MaintenanceOverheadEquipment
crane.,AuxiliaryPowerCarUnderslung
PowerCar,AccidentreliefMedicalvan,
breakdownrailcranesetc.
ICFChennai,RCFKapurthala,
PlasserFaridabad,BHELBhopal&
Jhansi,SANBangalore,DLW,Phoolta.
IndianRailways,Steel,Cement,
ThermalPower,Fertilizerplants,Port
Trustsetc.
Pumps
EngineDrivenpumpsfor
emergencydutyandcontinuos
duty,BlastFurnaceand
CoolingTower.
KirloskarBrothers,Mather&
PlattPumps,Voltas,WPIL,
BeaconWier,Flowmore,Punj
Llyod.
Refineries,MultipurposeChemical
Terminals,Ports,SteelMajors(TISCO,
Jindal,Bhushan,SAIL),PowerPlants,
(NTPC,NPCIL,TATAPower,PGCIL)
Oilfiel&
Defense
100HPto2700HPDieselenginesandgas
enginesfrom41hpto1200hpfor
DrillingACSCRDrillrigs,WorkOverrigs,
CementingUnits,Mudpumps,COD
pumps,CrudeOildispatchPumpsetc.
JivaInternational,JohnEnergy,
Ramsharan&Co.,BHEL,BPCL.
ONGC,OilIndiaLimited
Gas
Compression
Forgatheringrawnaturalgasatthe
wellhead,boostinggaspressurefor
pipelinetransmissionoroperatingaCNG
refuelingstation
AtlasCopcoIndiaLtd.,Doosan,Elgi
EquipmentsLtd.,KirloskarPneumatic
CompanyLtd.
DGBR/MajorConstruction
ContractorsL&TECC/Punj
Lloyd/GammonIndia/JaiprakashMajor
Mining/SteelCustomersCoalIndia
Ltd./TISCO/EMTA/HZL/SAILCement
ACC/GujaratAmbuja/GrasimMajor
MarbleandGranitecustomersRK
Marbles,GEMgranites,Pokarna
Granites
FishTrawler
Propulsionandauxiliaryenginesfrom50
to2000HPtopowervesselfishing
trawlers,persuneirs,gillnettersand
ferries,yachtsandtugboats,fireboats,
fishingboats,crewboats,generatingsets
andpumpunits
NA
NA
29thMarch2012
MicrosecResearch
- 10 Analyst:NehaMajithia,nmajithia@microsec.in,+03330512100
29thMarch2012
MicrosecResearch
CumminsMegasiteUpdatePhaltan
CumminsMegasiteis300acreprojectsinitiatedbyCumminsIndiaLtdatPhaltanBaramatiArea,markingthebeginningofacampusthat
willseenearly10facilitiesoperatingfromonelocationinthecomingfewyears.
TheprojecthasbeenawardedbytheGovernmentofMaharashtra,isdesignedtohouseongoingandfutureexpansionsofCummins.
Already3facilitieshavebeenoperational.
The three plants built on an investment of Rs. 500 crores are the first of several forthcoming facilities at the Megasite. They are as
follows:
29thMarch2012
MicrosecResearch
UpcomingFacilitiesatPlaltan
CommonPartsCenter(PDC)
It will serve all businesses of Cummins India. It will aim to improve supply chain efficiency in aftermarket parts distribution and
warehouse operations. It will also offer optimal warehouse space, bringing significant improvement to the companys inventory
management.ThePDCstartedinthethirdquarterofCY2011.
EngineUpfitPlant
Itwillcatertothegrowingbusinessesofconstruction,compressorandmarinesegments.Apartfromunfittingmechanicalandelectrical
BandLengineforvariousapplications,thefacilitywillalsomanufactureCseriesengines.Uponcompletiontheplantwillproduce20000
enginesannually.Thisfacilityisexpectedtocommenceoperationsbythefirsthalfof2012.
FacilityforPGSandGDrives
This facility would be for the manufacture of Power generator Sets and GDrives in the low and medium horse power range. It is
expectedtocommenceoperationbythemidof2012andwouldhaveamaturedcapacityof51000unitsby2015,mainlyforexports
market.
SegmentalAnalysis
IndustrialBusinessUnit(IBU)
The IBU which constitutes almost 20% of overall revenue is

growingataCAGRof15.23%forlast5years.TheCAGRinterms
800
ofprofitfortheperiod20052011is9%.TheIBUconstitutes15%
642.31
57%
600
UnderIBU,Thecompressorsegmentwitnessedarobustgrowth
triggeredbystrongperformanceinwaterwell,gascompression
500
30%
391
400
300
40%
25%
340
andportablecompressorsegments.
50%
558.53
553
508
INR(Cr)
ofmorethan42%inFY201011overFY200910.Thisgrowthwas
15%
272.1
30%
15%
9%
15%
2%
The water well segment is about 25% of the overall industrial

sales and has been cyclically climbing in last 3 years. This
70%
60%
700
ofthedomesticbusinessofCummins.
738.66
20%
10%
0%
200
FY200607
FY200708
FY200809
FY200910
FY201011
FY201112(E) FY201213(E) FY201314(E)
segment usually grows for 34 years and then undergoes a

correctionforcoupleofyears.Thissegmenthasdeclinedinlast
IBU
YoYChange(%)
three quarters of FY12 and is expected to tumble by 50% this

Source:MicrosecResearch,CompanyData,representsestimatedfigures
yearbecauseofirregularmonsoons.
The Construction segment grew by 43% in FY201011 over FY200911, on account of increased investment in the infrastructure
sector.
29thMarch2012
MicrosecResearch
Successfulimplementationofnewproductprograms,introductionofelectronicenginesonvariedapplications(e.g.15ltr.engines
for blast hole drilling application) led to a 26% growth in the Mining segment in FY201011 AS compared to FY200910. The
companysees10%growthinthissegmentforFY201112.
TheRailsegmentgrewby25%inFY201011overlastyear.ThegrowthwasboostedbytheexecutionofmajorprojectslikePower
Car,HHPDEMUandstrongparticipationin4wheeler&8wheelercarprojects.
It captured new business in High Horse Power segments by positioning value packages in rail (AC DEMU), marine & pumps
segments.
TheIBUispoisedtogrowataCAGRof12%inthenext5years.Thegrowthdriversbeing1)theupfitcentreatMegasitewithan
annualcapacityof20,000MWwhichwouldcatertotherequirementsofenginesfortheconstruction,compressor,marine&fire
pumpsmarkets3)BSIII&IVemissionnormsengines3)leadingpositioninthemarketintheoffhighwaywheeledconstruction
equipmentslikepavers,wheelloadersetc.
PowerGenerationBusinessUnit(PGBU)
35%
29%
1900
1734.03
1700
INR(Cr)
1290.2
1300
1100
12%
10%
19%
5%
5%
900
700
63%
16%
15%
1051.5
1002
30%
20%
20%
1358.1
1%
25%
1548.24
1500
1%
SalesMix
0%
2%
5%
5%
500
10%
FY200809
FY200910
FY201011
PGBU
FY201112(E)
FY201213(E)
FY201314(E)
YoYChange(%)
MHP&HHP
LHPDomestic
LHPExports
PE
ESB
Source:CompanyData
The PGBU which constitutes 45% of the overall revenue is growing at a CAGR of 17% for the period of 20052011 in terms of
revenueand20%intermsofprofit.Itdegrewby9%fortheperiodof9MFY12.
Inthissegment,thegensetsofsizebelowthan160kVAdeclinedbyalmost50%,themidsegmentof160Kvato380Kvadeclined
morethan10%,the450Kvato625Kvafellapproximatelyby20%andthegreaterthan750kVA,highhorsepowerenddegrewby
about10%inlast9MFY12.
Thesegmentislikelytoperformwellincomingquartersasweexpectthissegmenttopicksomemomentumkeepinginviewthe
increasingdemandfromsectorslikemanufacturing,retailandcommercialrealty.
29thMarch2012
MicrosecResearch
Gaspricingremainsaconcernwithgasdistributioncompaniesincreasingpricesby540%toexistingcustomers.Newgascontracts
arebeingnegotiatedinGujarat&NorthIndia.
ThePGBUislikelytogrowatCAGRof12%fornext5yearsonaccountof1)thefacilityatMIDCSEZwhichwouldcatermainlyto
theexports(30%ofoverallrevenue);PGBUis65%70%ofexports.2)planstoraisepricesinAprilofCY2012andpostemission
normswhichwouldboostuptherevenue3)HHPRebuildcentrewhichwillrepair&rebuildgensets&combustionengines4)
TataCumminsLtdwhichwillmanufactureBseriesengines&ISBelectricengines.
AutomotiveBusinessUnit(ABU)
TheABUwhichconstitutes25%ofthetotalrevenueisgrowingataCAGRof32%forlast3years.
Cummins has engineered products compliant with emission

norms in India. Starting April 2010, BSIV norms have been
400
150%
150%
356.5
implemented in 13 major cities and starting from October
350
2010,BSIIInormswillbeimplementedacrossthecountry.This
307.4
300
INR(Cr)
positionedthecompanyasapreferredsuppliertoIndianOEMs
fortheirDomesticandExportapplications.
After securing 100% of the requirements for the Delhi
269.6
264.5
245.1
250
7%
150 39%
Company has secured the entire second phase tender. The
100
50%
FY200809
enginesthroughitsBseriesLeanBurnengines.
FY200910
FY201011
FY201112(E)
ABU
YoYChange(%)
TheABUislikelytogrowatCAGRof14%innext5years.The
(Original Equipment Manufacturer) 2) growing demand in
0%
16%
14%
10%
106
Companymaintained100%marketshareinthepremiumCNG
growth drivers being 1) leading market position in OEMs
50%
200
Transport Corporation (DTC) tender for low floor buses, the
100%
FY201213(E)
FY201314(E)
market.
976.18
1000
DistributionUnit(DBU)
TheDBUwhichconstitutesaround1520%ofthetotalrevenue
900
isgrowingataCAGRof13%forlast3years.
18%
Thedistributionbusinessmaintainsapositiveoutlookwitha
CAGR of 13% for next 5 years. The growth drivers are 1)
several initiatives launched like inaugurating a state of the
INR(Cr)
800
10%
15%
4%
521
500
10%
5%
0%
FY200809
electronicenginestocatertothegrowingdemand.
15%
14%
600
art High Horse Power (HHP) Engine Rebuild Centre at the

CumminsMegasiteinPhaltanforitslineofHHPmechanical&
652
20%
771.68
742
700
25%
848.85
25%
30%
FY200910
FY201011 FY201112(E) FY201213(E) FY201314(E)
DBU
YoYChange(%)
29thMarch2012
MicrosecResearch
INR(Cr)
Financials&ProjectionataGlance
5376
5500
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
22%
4595
20%
21%
4102
3945
20%
3274
2845
20%
18%
584 434
19%
19%
19%
17%
779
582 444
18%
850
711 578
591
994
626
17%
712
16%
15%
FY200809
FY200910
FY201011
NetSales
FY201112(E)
EBITDA
PAT
FY201213(E)
FY201314(E)
EBITDAMargin(%)
Cummins is growing at a CAGR of 16.47% & 15.44% for last 5 years in terms of revenue and EBITDA respectively. The net profit is
growingataCAGRof19.55%forlast5years.
ThecompanyispoisedtogrowataCAGRof14%intermsofrevenueforthenext5yearswithsustainablegrowthacrossallsegments
andexpansionatCumminsMegasite,phaltan.
EBITDAMarginsareexpectedtomovebacktothehistoriclevelsof19%20%onaccountof1)stabilizationofcommodityinflation2)
decreaseininterestrates3)pickupindomesticdemand4)introductionofnewproducts5)Lowcostprocesseslikesixsigmamitigating
rawmaterialpressure&6)expansionatCumminsMegasite.
30.00
SustainablePATMarginsonaccountof1)lowinterestbecauseof
25.70
zerodebt&2)improvedotherincome.
25.00
22.90
21.32
In Q1FY12, the company issued Bonus Shares in the proportion

20.00
of2(two)BonusequitysharesofRs.2/eachforevery5(five)
INR(Cr)
22.25
20.87
22.60
20.55
18.07
15.64
existing equity shares of Rs. 2/ each fully paid up by

capitalizationofreservesoftheCompany.
23.38
16.01
15.00
10.00
8.45
5.00
FY200809
FY200910
FY201011
FY201112(E) FY201213(E) FY201314(E)
EPS P/E
29thMarch2012
MicrosecResearch
10.00
45.00%
40.70%
7.65
8.00
40.00%
37.99%
35.13%
34.76%
6.00
6.34
32.76%
5.63
4.00
30.00%
4.94
2.63
25.00%
0.00
20.00%
FY200809
FY200910
FY201011
FY201112(E)
FY201213(E)
FY201314(E)
32.72%
31.09%
4.29
2.00
FY200708
35.93%
35.00%
6.51
28.49%
28.43%
FY200809
FY200910
27.40%
27.34%
FY201011 FY201112(E) FY201213(E) FY201314(E)
Adj.P/BV
ROE
ROCE
Source:MicrosecResearch,CompanyData,representsestimated
600
7.31%
500
6.45%
5.89%
9.30%
6.45%
6.50%
400
INR(Cr)
10.00%
8.71%
500
400
6.86%
300
300
255
213
200
120
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
195
138
The company is likely to increase its employee

strength to 500 employees by FY201314 with its
expansionatMegasite.
The company saw improved representation of

womento19%,withalmost25%womenemployed
inkeyleadershiproles.
The company is committed to and is determined

towards achieving the target of 30% women
representationby2012.
1.00%
100
0.00%
FY200607
FY200708
FY200809
FY200910
EmployeeCost
FY201011 FY201112(E) FY201213(E) FY201314(E)
EmployeeCosttoSales
4400
The companys exports are likely to grow in the range of
3900
10%15% in coming years The growth drivers would be 1)
3400
The plant at MIDC SEZ which will manufacture
2900
>200KVA(LHP) and start up with annual capacity of 15000
units and will ramp up to 51000 units in coming years. It
INR(Cr)
representsestimatedfigures
Source:MicrosecResearch,CompanyData,
1900
1400
bottomlinegrowth2)exportmixwhichisprettywellspread
900
acrossgeographically.
400
3216
2920
2872
2412
2400
would be substantial upside to companys topline and
3763
2021
1958
1497
1283
602
728
FY200607
FY200708
1026
1231
1378
433
FY200809
The companys focus on HHP (High Horse power) engines
FY200910
Domestic
FY201011 FY201112(E) FY201213(E) FY201314(E)
Exports
whichcomprises6570%ofexports
29thMarch2012
1613
MicrosecResearch
FinancialsataGlance(Cont)
80
1342.49
1400
70
1000
851.11
772.3
800
507.28
600
57.2
60
1096.27
INR(Cr)
INR(Cr)
1200
69.1
65.9
51
49.1
50
40
30
479.42
20
400
FY200809
ForeignExchangeInflow
FY200910
FY200607
FY201011
FY200708
FY200809
FY200910
FY201011
GrossmaterialCostSavings
ForeignExchangeOutflow
Source:MicrosecResearch,CompanyData
9
35
30.8
31.42 31.75
32.69
30
25
Rs.perShare
5
INR(Cr)
20
15
10.01
10
5
4
3
2.6
2.4
2
1
0
FY200809
CapitalExpenditure
FY200910
FY200809
FY201011
FY200910
InterimDividend
RecurringExpenditure
FY201011
FinalDividend
9MFY12
SpecialDividend
29thMarch2012
MicrosecResearch
RawmaterialMix
RawMaterialConsumption
1800
1.03%
1600
1.51%
Forgings
1400
INR(Cr)
Castings
1688.37
1651.14
0.54%
1218.1
1200
9.21%
Engines
1000
17.49%
800
517.86
600
Longblocks
70.22%
461.17
295.61
400
Othersincluding
semifinished
components
200
FY200809
FY200910
FY201011
Components
Components
Others
CumminsIndiaLtdEBITDAMarginTrendVs.Copper&PigIronPricesMovement
22%
22%
150
9000
20%
20%
130
18%
18%
7000
110
16%
90
16%
5000
14%
70
50
14%
12%
FY200506 FY200607 FY200708 FY200809 FY200910 FY201011
IndiaWholesaleIndexPigIron(Rs/tonne)
3000
9M12
12%
FY200506 FY200607 FY200708 FY200809 FY200910 FY201011
EBITDAMargin(%)
LMECopperPrices(US$/tn)
9M12
EBITDAMargin(%)
Source:MicrosecResearch,CompanyData,Bloomberg
Source:MicrosecResearch,CompanyData,Bloomberg
Note:CopperandPigIronform60%65%ofCumminsIndiasTotalRawMaterialCost
29thMarch2012
MicrosecResearch
QuarterlyAnalysis
Particulars(INRinCrores)
INCOME
Q3FY12
NetSales
OtherOperatingIncome
TotalIncomefromOperation
Q2FY12
YoY(%)
QoQ(%)
9MFY12
9MFY11
%Changeof9M
970.51
958.35
1069.81
1.27%
9.28%
3062.25
2935.88
4.30%
29.27
34.17
20.51
14.34%
42.71%
73.16
76.01
3.75%
999.78
992.52
1090.32
0.73%
8.30%
3135.41
3011.89
4.10%
914.41
asa%ofsales
84.58%
84.82%
85.47%
EBITDAMargin(%)
18.43%
18.74%
16.44%
(31)bps
199bps
17.65%
20.24%
(259)bps
EBITDA
178.89
179.64
175.91
0.42%
1.69%
540.44
594.36
9.07%
10.92
9.1
9.84
30.11
27.7
EBITMargin(%)
17.31%
17.80%
15.52%
23bps
179bps
16.67%
19.30%
(263)bps
EBIT
167.97
170.54
166.07
1.51%
1.14%
510.33
566.66
9.94%
0.3
0.31
0.48
3.23%
37.50%
1.13
1.13
0.00%
26.86
10.26
16.34
161.79%
64.38%
59.05
40.42
46.09%
194.53
180.49
181.93
7.78%
6.93%
568.25
605.95
6.22%
51.44
PBTMargin(%)
20.04%
18.83%
17.01%
121bps
303bps
20.24%
20.64%
(40)bps
PBTafterexceptionalitems
194.53
180.49
181.93
7.78%
6.93%
619.69
605.95
2.27%
53.58
41.59
53.35
28.83%
0.43%
172.99
158.93
8.85%
asa%ofPBT
27.54%
23.04%
29.32%
27.92%
26.23%
PATbeforeextraordinaryitems
140.95
138.9
128.58
446.7
447.02
140.95
138.9
128.58
446.7
447.02
PATMargin(%)
14.52%
14.49%
12.02%
3bps
250bps
14.59%
15.23%
(64)bps
PATafterminorityinterest
140.95
138.9
128.58
1.48%
9.62%
446.7
447.02
0.07%
55.44
39.6
55.44
55.44
39.6
BasicEPS
5.08
7.02
4.64
27.52%
9.58%
16.11
22.58
28.62%
AdjustedEPS
5.08
5.01
4.64
1.48%
9.62%
16.11
16.13
0.07%
OtherIncome
PBTbeforeexceptionalitems
exceptionalitems
Tax
Extraordinaryitem
PATafterextraordinaryitems
Shareinprofitofassociates
PaidupEquityShareCapital
2594.97
812.88
10.23%
820.89
Interest
0.99%
TOTALEXPENDITURE
Depreciation
Q3FY11
1.48%
9.62%
1.48%
9.62%
2417.53
7.34%
0.07%
0.07%
29thMarch2012
MicrosecResearch
TheNetsalesforQ3FY12wasINR970.51crores,downby9.28%sequentiallyand1.27%uponYoYbasis.Domesticsalesweredown
10% and exports were down 8% sequentially. The decline in domestic sales has been largely driven by the power generation
segmentwhichhasbeendownabout27%sequentiallyand9%yeartodate. Withinthepowergenerationsegment,companyhas
beenobservinghugedemandfromretailandITES.Telecomthatusedtobeoneofthemajorgrowthdriversforthesegmenthas
beenobservingsluggishdemand.
Theindustrialbusinesshoweverhasactuallypickedupandwasup30%sequentiallyandaboutflatyeartodate.TheAutomotive
businesswasdown37%sequentiallybuthasbeengrowing24%onayeartodatebasis.Distributionbusinesscontinuedtogrowat
approximately3%to4%levelsbothascomparedtolastyearaswellassequentially.
TheEBITDAforQ3FY12wasINR178.89crores,whichremainedflatonYoYbasisandupby1.69%sequentially.TheEBITDAMargin
was 18.43%, which was almost flat sequentially and up by 199bps on YoY basis. The improvement in margins sequentially was
mainly due to a positive exchange rate of `/$ (company earns in dollars for a majority of exports), cost reduction activities,
favourablerevenuemixandcommoditiestosomeextent.
Managementhasindicatedthatthecompanyislikelytomaintainmarginsatcurrentlevelsgoingaheadmainlyonbackofvarious
ongoingcostrationalizingmeasuresbeingimplemented.
Inthisquarter,employeecosthasincreasedby21.6%YoY.Webelievethatthecompanyisincreasingitslabourforceinviewofthe
successivecommissioningofnewcapacityatPhaltan.
ThecompanyreportedaNetProfitofINR140.95croresforQ3FY12,showingasharpincreaseof9.62%sequentiallyand1.48%on
YoYbasis.
Exports business grew by nearly 15% in Q3FY12. Lower base of exports in Q3FY11 coupled with improved demand for high HP
enginesinUSaidedtothegrowthinexportsrevenueforthequarter.
On 9month basis, the Net sales arrived at INR3062.25 crores, depicting an increase of 4.30%. The domestic power business
declinedby9%onYoYbasisandindustrialsegmentobservedmutedrevenuegrowth.Also,waterwellbusinesswhichaccountsfor
amajorityofindustrialsegmentsalecontinuedtobeinthedecliningmode.Ourindustryinteractionimpliesthatthewaterwell
industryisgoingthroughthecyclicalslowdown.
Automotivesegmentgrewby24%in9MFY12 withmeaningfulgrowth incommercialvehicle segment.Thedistributionsegment

grewby4%forthesameperiod.
TheNetprofitin9MFY12wasINR446.70crores,showedmutedgrowthascomparedtothesameperiodoflastfinancialyear.
29thMarch2012
MicrosecResearch
KeyManagementPersonnel
PeerComparison
Particulars(INRinCr)
CumminsIndiaLtd
NetSales(INRCr)
GreavesCottonLtd
4,071.81
2314.91
EBITDA(INRCr)
725.29
245.13
EBITDAMargin(%)
17.81%
10.59%
PAT(INRCr)
590.67
154.41
PATMargin(%)
14.51%
6.67%
12,758.13
2075.76
3.13
0.90
25.19
7.84
MarketCapitalization
MarketcaptoSales
EPS
Adj.EPS
21.30
7.84
27.97%
30.59%
P/E
21.69
10.84
CMP
462.00
85
ROE
*AllfiguresarecalculatedonTTMbasisSource:MicrosecResearch
29thMarch2012
MicrosecResearch
KeyRisks&Concerns
Therisksduetointerestratesbeinghikedtocurbrisinginflation,coulddampenindustrialactivity.Risingcommoditypricescouldalso
putpressureonCompanymargins.
Key international players are making their foray into India. Private players are also entering socalled Government domains like
miningandexploration.Thiswillseetheintensityofthecompetitivelandscaperisingtonewlevels.
ThecyclicaldownturninthewaterwellmarketwhichbeganinQ1FY11islikelytocontinuefortherestoftheyear.
LackofimmediatevisibledemandforCNGbusesislikelytoaffectdemandforCNGenginesinnearfuture.
Steadyincreasesincommodityinflation,increasesininterestratesanddeclinesindomesticdemandincertainsegments.
Valuation
We followed consolidated approach to value Cummins India Limited based on Discounted Cash Flow (DCF) and Comparative valuation
methodologies.Incomparativevaluation,wepursuedPricetoEarnings(P/E)andPricetoBookValue(EV/EBITDA)methods.Inaddition,to
arrive at a final valuation, we provided different weights to each of our valuation methods. Adescription of valuation through each of the
adoptedtechniqueandconsolidatedvaluationisasfollows:
DiscountedCashFlow(DCF)
WeutilizedWeightedAverageCostofCapital(WACC)of10.23%todiscountthefutureearningsofCumminsIndia.Inaddition,weapplieda
terminalgrowthrateof2.00%fortheearningsbeyondFY2016E.WearrivedattheWACCwithaCostofEquityof10.25%,posttaxCostof
Debt of 8.28%, and DebttoEquity of 0.01x. By adopting Capital Asset Pricing Model (CAPM), we arrive at Cost to Equity based on Market
Returnof11.13%,RiskFreeRateof8.47%andBetaof0.67x.Furthermore,theCostofDebtrepresentsexpectedinterestcostafterdeducting
thetaximpact.Withthis,ourDCFvaluationreflectsatargetpriceof`594.41forthestock,whichreflectsanupsideof28.66%fromtheCMP
of`462.
PricetoEarnings(P/E)
Based on a targeted P/E multiple of 19.83x on FY2014EEPS of `25.70 per share, we arrived at a target price of `509.48 per
shareforthecompany,withtheCMPof`462.00
29thMarch2012
MicrosecResearch
EV/EBITDA
Basedonthelast3yearsaverageofEV/EBITDAi.e`12.49andEBITDAofFY201314i.e`994.48,wearrivedatatargetpriceof
`451.06.
ConsolidatedValuation
Considering future earnings growth visibility and current market scenario, we assigned 50% weight to the DCF approach followed by 25%
weight each to P/E and EV/EBITDA methodologies. With this, we arrived at a target price of `537.34 per share for Cummins India, 16.31%
upsidefromCMPof`462.00pershare.
ConsolidatedValuation
Particulars
TargetPrice
Weight
ShareinTargetPrice
ValuebasedonDCFapproach
594.41
50%
297.21
ValuebasedonP/Eapproach
509.48
25%
112.76
ValuebasedonEV/EBITDAapproach
451.06
25%
127.37
ConsolidatedValue
537.34
29thMarch2012
MicrosecResearch
IncomeStatement
YearendedMarch,31st
Particulars
INCOME
FY200809A
FY200910A
FY201011A
FY201112E
FY201213E
FY201314E
NetSales
3274.05
2844.87
3945.44
4102.25
4594.52
5375.59
Growthinsales(%)YoY
40.47%
13.11%
38.69%
3.97%
12%
17%
OtherOperatingIncome
106.87
54.16
115.73
93.16
114.86
134.39
as%ofsales
3.26%
1.90%
2.93%
2.27%
2.50%
2.50%
TotalIncomefromOperation
3380.92
2899.03
4061.17
4195.41
4709.38
5509.98
Growth(%)YoY
37.80%
14.25%
40.09%
3.31%
12.25%
17.00%
TOTALEXPENDITURE
2796.81
2,317.39
3,281.97
3484.17
3859.40
4515.49
as%ofsales
85.42%
81.46%
83.18%
84.93%
84.00%
84.00%
EBITDAMargin(%)
17.84%
20.45%
19.75%
17.34%
18.50%
18.50%
EBITDA
584.11
581.64
779.2
711.24
849.99
994.48
Growth(%)
60.60%
0.42%
33.97%
8.72%
19.51%
17.00%
45.56
36.08
36.64
40.11
41.30
52.31
EBITMargin(%)
16.45%
19.18%
18.82%
16.36%
17.60%
17.53%
EBIT
538.55
545.56
742.56
671.13
808.68
942.18
2.61
2.05
1.9
1.53
1.73
1.93
43.88
67.4
61.7
79.05
63
63
579.82
610.91
802.36
748.65
869.95
1003.25
19.2
51.44
PBTMargin(%)
18.30%
21.47%
20.34%
19.50%
18.93%
18.66%
PBTafterexceptionalitems
599.02
610.91
802.36
800.09
869.95
1003.25
Tax
165.37
167.05
211.38
221.70
243.59
290.94
Tax(%)
27.61%
27.34%
26.34%
28%
28%
29%
PATbeforeextraordinaryitems
433.65
443.86
590.98
578.39
626.36
712.31
433.65
443.86
590.98
578.39
626.36
712.31
PATMargin(%)
13.25%
15.60%
14.98%
14.10%
13.63%
13.25%
PATafterminorityinterest&shrsinassociates
433.65
443.86
590.98
578.39
626.36
712.31
39.6
39.6
39.6
55.44
55.44
55.44
EPS*
21.90
22.42
29.85
20.87
22.60
25.70
AdjustedEPS
15.64
16.01
21.32
20.87
22.60
25.70
Depreciation
Interest
OtherIncome
PBTbeforeexceptionalitems
exceptionalitems
Extraordinaryitem
PATafterextraordinaryitems
Shareinprofitofassociates
PaidupEquityShareCapital(FaceValueofRs.2.00)
*InQ1FY12,thecompanyissuedBonusSharesintheproportionof2(two)BonusequitysharesofRs.2/eachforevery5(five)existingequitysharesofRs.2/
eachfullypaidupbycapitalizationofreservesoftheCompany.
29thMarch2012
MicrosecResearch
BalanceSheet
BalanceSheetason31st,March
Particulars
FY200809A
FY200910A
FY201011A
FY201112E
FY201213E
FY201314E
SOURCESOFFUNDS:
ShareCapital
39.6
39.6
39.6
55.44
55.44
55.44
Reserves&Surplus
1355.05
1521.39
1766.67
1974.72
2230.75
2549.57
Shareholder'sFunds
1394.65
1560.99
1806.27
2030.16
2286.19
2605.01
SecuredLoans
21.2
8.62
18.26
18.26
15.76
17.26
UnsecuredLoans
0.04
0.01
0.01
0.24
21.24
8.63
18.26
18.27
15.76
17.5
1.67
1417.56
1569.62
1824.53
2048.43
2301.95
2622.51
LoanFunds
FinanceLeaseLiability
Total
APPLICATIONOFFUNDS
FixedAssets
GrossBlock
699.52
738.40
829.76
1114.45
1314.45
1514.45
()AccumulatedDepreciation
432.36
443.96
473.38
513.49
554.79
607.10
Netblock
267.16
294.44
356.38
600.96
759.66
907.35
41.86
39.22
84.69
100.00
100.00
80.00
399.27
732.92
725.44
725.44
725.44
725.44
23.06
16.99
18.74
18.74
18.74
18.74
FixedAseets&Investments
731.35
1083.57
1185.25
1445.14
1603.84
1731.53
Inventories
467.97
409.67
518.96
555.01
599.78
664.67
SundryDebtors
682.11
522.9
718.16
792.27
875.15
934.88
OtherCurrentassets
8.32
9.27
9.84
9.84
9.84
9.84
Cash&Bankbalance
32.31
55.91
103.73
78.41
84.72
34.16
266.32
269.49
329.72
369.20
459.45
537.56
1457.03
1267.24
1680.41
1804.73
2028.94
2181.12
CurrentLiabilities
597.66
520.92
710.88
841.01
931.58
903.10
Provisions
173.17
260.28
330.25
360.43
399.25
387.04
Less:TotalCurrentLiabilities&Provisions
770.83
781.2
1041.13
1201.44
1330.83
1290.14
686.2
486.04
639.28
603.29
698.11
890.98
1417.55
1569.61
1824.53
2048.43
2301.95
2622.51
CapitalWorkionProgress
Investments
NetDeferredTaxation
Loans&Advances
TotalCurrentAssets,Loans&Advances
NetCurrentAssets
MiscellaneousExpenditure
TOTAL
29thMarch2012
MicrosecResearch
CashFlowStatement
CashFlowFortheYearEndedMrch,31st
Particulars
A.CashFlowFromOperatingActivities
FY200809A
FY200910A
FY201011A
NetProfitBeforeTax
Depreciation
Loss/(Profit)onassetssoldordiscarded
Profitonsaleofassets
FY201112E
FY201213E
800.09
FY201314E
599.02
610.91
802.36
869.95
45.56
36.08
36.64
1.98
0.84
0.24
40.11
1003.25
41.30
52.31
profitonsaleofinvestments
2.25
0.36
0.03
ProfitonPowerGenerationpowerrentalbusiness
19.2
8.67
2.44
1.79
Baddebtswrittenoff
Unrealizedexchangegain(net)
2.61
2.05
1.9
ProvisionforDoubtfuldebts
InterestExpenses
1.53
1.73
1.93
InterestIncome
3.83
3.15
11.12
DividendIncome
24.08
60.61
50.47
OperatingProfitbeforeWCchanges
608.48
587.24
781.31
841.73
912.99
1057.48
(Increase)/DecreaseinInventories
72.98
58.31
109.3
36.05
44.76
64.90
(Increase)/DecreaseinSundryDebtors
115.72
156.76
197.04
74.11
82.88
59.74
(Increase)/Decreaseinloansandadvances
54.69
5.3
55.26
39.48
90.25
78.11
Increase/(Decrease)inCurrent&Liabilities
41.1
66.05
216.94
160.31
129.39
40.69
(Increase)/DecreaseinOtherCurrentAssets
2.4
0.08
0.57
0.00
0.00
0.00
Cashgeneratedfromoperations
406.19
730.88
636.08
852.39
824.48
814.06
Directtaxespaid
185.04
154.95
218.09
221.70
243.59
290.94
NetCashfromOperatingActivities
221.15
575.93
417.99
630.69
580.90
523.11
B.CashFlowFromInvestingActivities
PurchaseofFixedAssets
SaleofFixedAssets
Saleconsiderationforpowergenerationrentalpower
business
(Purchase)/SaleofInvestments
90.82
66.45
148.58
300.00
200.00
180.00
1.25
4.64
0.66
0.00
0.00
0.00
30
41.25
334.02
7.5
InterestReceived
4.61
2.29
11.12
DividendReceived
24.08
56.71
50.47
NetCashusedinInvestingActivities
C.CashFlowFromFinancingActivities
10.37
336.83
78.83
BankOverdraft(Net)
7.51
12.57
FinanceLeaseLiability
3.11
1.67
Loanrepaid
0.05
0.03
0.01
InterestPaid
300
9.64
200
0.01
2.51
180
1.74
2.61
2.05
1.89
1.53
1.73
1.93
DividendPaid(includingtaxondividend)
209.86
199.18
299.08
354.50
370.34
393.49
NetCashfrom/(Used)infinancingactivities
223.14
215.5
291.34
356.02
374.58
393.67
8.38
23.6
47.82
25.32
6.32
50.56
23.93
32.31
32.31
55.91
55.91
103.73
103.73
78.41
78.41
84.72
84.72
34.16
Net(Increase)/Decreaseincash&cashequivalents
Cash&CashEquivalentsatbeginning
Cash&CashEquivalentsatEnd
29thMarch2012
MicrosecResearch
RatioAnalysis
Ratios
FY2008-09A
FY2009-10A
FY2010-11A
FY2011-12E
FY2012-13E
FY2013-14E
ProfitabilityRatios(%)
ReturnonAssets(ROA)
30.59%
28.28%
32.39%
28.24%
27.21%
27.16%
ReturnonCapitalEmployed(ROCE)
37.99%
34.76%
40.70%
32.76%
35.13%
35.93%
ReturnonEquity(ROE)
31.09%
28.43%
32.72%
28.49%
27.40%
27.34%
EarningsPerShare
21.90
22.42
29.85
20.87
22.60
25.70
Adj.EarningsPerShare
15.64
16.01
21.32
20.87
22.60
25.70
DividendPershare
9.00
12.00
15.00
16.00
16.00
17.33
CashEarningsPerShare
24.20
24.24
31.70
22.31
24.09
28.11
BVPS
70.44
78.84
91.23
73.24
82.47
95.77
Adj.BVPS
50.31
56.31
65.16
73.24
82.47
93.98
Adj.P/Eratio
8.45
22.90
23.38
22.14
20.45
17.98
P/CEPS
5.46
15.13
15.73
20.71
19.18
16.43
NormalizedP/BVPS
1.88
4.65
5.46
6.31
5.60
4.82
Adj.P/BVPS
2.63
6.51
7.65
6.31
5.60
4.92
MarketCap/Sales
1.12
3.57
3.44
3.11
2.78
2.37
EV/EBITDA
5.84
15.60
16.02
18.97
15.87
13.61
CurrentRatio
1.89
1.62
1.61
1.50
1.52
1.69
AcidTestRatio
1.28
1.10
1.12
1.04
1.07
1.18
DebtEquityRatio
0.02
0.01
0.01
0.01
0.01
0.01
AssetturnoverRatio
2.83
1.90
2.32
2.12
2.11
2.18
WorkingCapitalTurnoverRatio
5.37
4.15
8.12
6.42
7.62
7.70
InventoryTurnoverRatio
8.95
6.48
8.50
7.64
7.96
8.50
EBITDAMargin
17.84%
20.45%
19.75%
17.34%
18.50%
18.50%
EBITMargin
16.45%
19.18%
18.82%
16.36%
17.60%
17.53%
PBTMargin
18.30%
21.47%
20.34%
19.50%
18.93%
18.66%
NetProfitMargin
13.25%
15.60%
14.98%
14.10%
13.63%
13.25%
PerShare
ValuationParameters
LiquidityRatios
EfficiencyRatios(%)
MarginRatios(%)
29thMarch2012
MicrosecResearch
MicrosecResearch:PhoneNo.:913330512100Email:microsec_research@microsec.in
AjayJaiswal:President,InvestmentStrategies,HeadofResearch:ajaiswal@microsec.in
FundamentalResearch
Name
Sectors
Designation
EmailID
NitinPrakashDaga
IT,Telecom&Entertainment
AVPResearch
npdaga@microsec.in
NaveenVyas
Midcaps,MarketStrategies
AVPResearch
nvyas@microsec.in
GargiDeb
Agriculture&Pharma
ResearchAnalyst
gdeb@microsec.in
SutapaRoy
Economy
ResearchAnalyst
sroy@microsec.in
SanjeevJain
BFSI
ResearchAnalyst
sjain@microsec.in
AnikDas
MidCap
ResearchAnalyst
adas4@microsec.in
NehaMajithia
MidCap
ResearchAnalyst
nmajithia@microsec.in
SoumyadipRaha
MidCap
ExecutiveResearch
sraha@microsec.in
SarojSingh
MidCap
ExecutiveResearch
ssingh2@microsec.in
Technical&DerivativeResearch
VinitPagaria
Derivatives&Technical
VP
vpagaria@microsec.in
RanajitSaha
TechnicalResearch
Sr.Manager
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InstitutionalDesk
DhruvaMittal
InstitutionalEquities
Sr.Manager
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InstitutionalDesk
Dealer
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PMSResearch
AVP
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Research:FinancialPlanningDivision
ShrivardhanKedia
FPDProducts
ManagerResearch
skedia@microsec.in
ResearchSupport
SubhabrataBoral
ResearchSupport
Asst.ManagerTechnology
Recommendation
Expectedabsolutereturns(%)over12months
StrongBuy
>20%
Buy
between10%and20%
Hold
between0%and10%
Underperform
between0%and10%
Sell
<10%
sboral@microsec.in
MICROSECRESEARCHISALSOACCESSIBLEONBLOOMBERGAT<MCLI>
29thMarch2012
MicrosecResearch
29thMarch2012
MicrosecResearch
Disclaimer:
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29thMarch2012
MicrosecResearch

Initiating Coverage Report Cummins India LTD: Recommendation: BUY

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industrial output, substantial increase in vehicle prices coupled

impacting growth in the sector. The Medium and Heavy CV

OEMs in transitioning to the new emission norms with the right

The IBU which constitutes almost 20% of overall revenue is

The water well segment is about 25% of the overall industrial

FY201112(E) FY201213(E) FY201314(E)

segment usually grows for 34 years and then undergoes a

three quarters of FY12 and is expected to tumble by 50% this

Cummins has engineered products compliant with emission

implemented in 13 major cities and starting from October

After securing 100% of the requirements for the Delhi

Company has secured the entire second phase tender. The

(Original Equipment Manufacturer) 2) growing demand in

growth drivers being 1) leading market position in OEMs

Transport Corporation (DTC) tender for low floor buses, the

art High Horse Power (HHP) Engine Rebuild Centre at the

FY201011 FY201112(E) FY201213(E) FY201314(E)

In Q1FY12, the company issued Bonus Shares in the proportion

existing equity shares of Rs. 2/ each fully paid up by

FY201112(E) FY201213(E) FY201314(E)

FY201011 FY201112(E) FY201213(E) FY201314(E)

The company is likely to increase its employee

The company saw improved representation of

The company is committed to and is determined

FY201011 FY201112(E) FY201213(E) FY201314(E)

The companys exports are likely to grow in the range of

10%15% in coming years The growth drivers would be 1)

The plant at MIDC SEZ which will manufacture

>200KVA(LHP) and start up with annual capacity of 15000

units and will ramp up to 51000 units in coming years. It

would be substantial upside to companys topline and

The companys focus on HHP (High Horse power) engines

FY201011 FY201112(E) FY201213(E) FY201314(E)

Automotivesegmentgrewby24%in9MFY12 withmeaningfulgrowth incommercialvehicle segment.Thedistributionsegment

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