Cummins India slumps 3% after UBS Securities recommends ‘sell’ on stock

The brokerage has recommended a ‘sell’ with a target price of Rs 1,350 per share. It also sees an increasing risk of downgrades on the company over coming quarters.

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Cummins India shares were down nearly 3 percent on September 28 after UBS Securities gave a ‘sell’ rating on the engine manufacturing company’s stock.

UBS seeing a downside potential for the stock from the current price levels has set a target price at Rs 1,350 per share.

“Best phase of short cycle led earnings momentum is behind. There are more players now in the engine manufacturing segment who are successfully complying with the stringent CPCB 4+ norms. We remain constructive on the domestic revenue growth of the company. However, we are cautious on how it might perform on the exports front,” the brokerage said.

UBS also sees an increasing risk of downgrades on the company over coming quarters.

At 1 pm on the NSE, the Cummins India stock was quoting at Rs 1,689.20 apiece, down Rs 42.40, or 2.45 percent.

The stock has been in a consolidation phase since August 8, down nearly 2 percent. It has a trailing PE of 37.56x, making it the second most expensive stock in absolute terms among the domestic engine making peers.

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In its results for the April-June quarter, the company reported a 30.77 percent YoY (year-on-year) increase in revenue from operations at Rs 2,218 crore. Net profit for the quarter was up 78.78 percent YoY at Rs 354 crore. The operating profit margins for the quarter expanded by 200 basis points on a yearly basis to 15 percent.

Cummins India is engaged in the business of manufacturing and supplying engines, power generation systems, and related components. The company’s products cater to various industries, including automotive, industrial, power generation, and marine.

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