Multiple demand triggers to keep sales trajectory strong for Cummins India

Following changes in emission norms, Cummins India is benefitting from a broadbased demand revival in the generator segment, with demand mainly coming from sectors like real estate, manufacturing, hospitals, and, above all, data centres.

 

Early product launches and reliable aftermarket support make the company a market leader. Central Pollution Control Board (CPCB)-IV+ volumes are at 80-85 per cent of CPCB-II levels, and prices have held firm. Most projections suggest mid-teens annual revenue and net profit growth rates, or better, until 2027-28 (FY28).

 

Domestic demand is expected to remain healthy, with a focus on high-horsepower (HHP) products. India is adding 200-300 megawatts (Mw) of data centre capacities annually, and this pace could accelerate. India’s data centre capacity, which stood at 1.3 gigawatts (Gw) as of March 2025, is projected to grow to 7.5 Gw by FY30.

 

Exports also continue to benefit from global data centre demand. The Cummins India management is cautiously optimistic about gradual export demand recovery, despite economic and geopolitical headwinds, with associated scale and margin benefits.

 

In Q1FY26, the company’s revenues rose 26 per cent year-on-year (Y-o-Y) and exports grew 34 per cent. Domestic growth was 25 per cent.

 

Operating profit rose 33 per cent Y-o-Y, with margins growing 117 basis points to 21.4 per cent and net profit 30 per cent. Cummins was well-positioned for CPCB-IV+ norms. However, there may be supply-side issues as an increase in commodity prices pulls gross margins down. Global demand could narrow or weaken due to geopolitical uncertainties.

 

The policy thrust across infrastructure sectors would continue to drive demand and benefit the company, given its strong parentage and proven technological capabilities. Cost initiatives undertaken by the company have also yielded benefits in terms of improved operating profit margins.

 

Though competition is catching up in the domestic powergen market, Cummins holds a lead in the high-kilovolt-amperes (kVA) segment, with a good portfolio. It also has a strong distribution network for low- and mid-kVA segments. The industrial segment has also grown quickly, driven by demand from the railways, mining, and compressor segments. Over the medium to long term, the growth drivers are likely to be new products for railways, alongside higher demand from construction and mining. Mid- to high-teens growth looks possible in these segments until FY28. In railways, there is demand for diesel electric tower cars (DETC) and power cars and indigenisation of construction, and mining equipment is supported by the production-linked incentive (PLI) scheme.

 

Given newer, more sophisticated gensets in the CPCB-IV+ category, integrated telematics is creating improved customer insights and aftermarket opportunities. Price hikes of 5-10 per cent have been undertaken in some segments. The combination of technology-led servicing, and general product acceptance suggests the distribution network could be a steady growth driver, with higher margins due to aftermarket penetration.

 

In exports, data centres are the big focus area, and so is the low-horsepower segment. Europe, Africa, and West Asia are showing steady demand, while exposure to the US is limited. In battery energy storage systems (BESS), demand is fuelled by the rapid scaleup of intermittent sources like solar and wind.

 

Cummins is designing and assembling BESS products, although some key components have to be imported. This is a new revenue stream which ties in with the company’s “Destination Zero” strategy for decarbonisation.

 

For now, Cummins India is unlikely to venture into large utility-scale BESS solutions. Given the efforts to maintain competitive pricing, and the gaps in supply chain in India, manufacturing might remain reliant on China. But Cummins India is providing more features to service BESS demand, which is coming from environmental, social, and governance (ESG) and sustainability goals, and the management believes solar adoption is unlikely to dampen demand for gensets as a reliable backup.  The company expects consumers with both gensets and solar to opt for BESS as well and the recent goods and services tax (GST) rate cuts could push private capex. Valuations are high, with the share price running at 48 times price to earnings ratio on estimated FY26 earnings.