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Cummins India (Cummins) reported good results for the first quarter of 2025-26 (Q1FY26), comfortably beating consensus. Revenue growth was fuelled by growth in powergen and export business segments, with some gain in market share in powergen. Demand improvement in the powergen segment may be on the horizon with prices stabilised.
Consolidated revenues increased 26 per cent year-on-year (Y-o-Y) to ₹2,910 crore. Domestic sales at ₹2,340 crore grew 25 per cent Y-o-Y (21 per cent quarter-on-quarter, or Q-o-Q), whereas export sales rose 34 per cent Y-o-Y (9 per cent Q-o-Q) to ₹520 crore. Exports have been continuously increasing since Q4FY24.
Gross margin at 37 per cent contracted 80 basis points (bps) Y-o-Y (20 bps Q-o-Q) due to an increase in project business. But lower employee costs and other expenses led to Ebitda (earnings before interest, taxes, depreciation and amortisation) margin expansion of 117 bps Y-o-Y (20 bps Q-o-Q) to 21.4 per cent. Absolute Ebitda rose 33 per cent Y-o-Y (20 per cent Q-o-Q) to ₹620 crore. Adjusted profit after tax (PAT) increased 32 per cent Y-o-Y to ₹560 crore. Cummins also had an exceptional gain of ₹44 crore related to the sale of 100 per cent stake in its wholly owned subsidiary Cummins Sales & Service Private Limited (CSSPL). Reported standalone PAT was thus up 40 per cent Y-o-Y at ₹589.27 crore. At consolidated level, the exceptional gain on account of the stake sale was ₹12.6 crore, and PAT was up 31 per cent Y-o-Y at ₹604.80 crore.
Powergen revenues grew 31 per cent Y-o-Y during Q1FY26. Powergen volumes are getting the benefit of a broad-based demand revival. Sequentially, powergen revenues below the 750 kilovolt-ampere (kVa) category have grown 29 per cent. Cummins appears to have gained market share in Q1FY26. In the above-750 kVa category, revenues rose 24 per cent Y-o-Y, reflecting market leadership. Data centres account for 15-20 per cent of overall powergen sales.
Industrial segment growth stood at 12 per cent Y-o-Y for Q1FY26, with sub-segments, such as railways, mining, and compressors, contributing to growth while the construction growth was hit by monsoons. Growth should pick up going forward.
Cummins’ distribution segment revenue grew by 19 per cent Y-o-Y (23 per cent Q-o-Q) to ₹780 crore in Q1FY26, supported by penetration in powergen and railways. New products such as DF (dual fuel) kits, power management solutions, AdBlue (diesel exhaust fluid), hydraulic filters, and innovations in the railway segment are contributing. The CPCB IV+ transition has increased the technological complexity of gensets, favouring branded players with strong technical teams. CPCB IV typically refers to the Central Pollution Control Board IV emission standards for diesel generators in India.
While near-term growth is driven by deeper penetration and execution, the rampup of new products could add incremental upside.
Export revenues surged 34 per cent Y-o-Y in Q1FY26, with both HHP and LHP categories performing strongly. Growth was broad-based across geographies, led by Latin America and Europe. Despite geopolitical and trade policy risks, the underlying demand in key markets remains healthy, according to the management. Potential opportunities in the US, for engines like QSK38 and QSK50, offer potential additional upside.
Key risks would come from lower-than-expected demand for key segments, higher commodity prices, increased competitive intensity, and lower-than-expected recovery in exports.
The management’s outlook is confident. Despite uncertainty around the full impact of global tax and trade policies on the economic landscape in the near- to mid-term future, the management is confident that Cummins can meet these challenges with its diversified portfolio of products that conform to evolving emission norms, access to the latest technology, trusted brand, advanced manufacturing capabilities, good distribution and service network, and cost management. The management remains cautiously optimistic in the near term and sees a very positive outlook for sustained long-term growth.
Cummins’ Q1FY26 outperformance was driven by demand from markets like data centres and mission critical applications. Exports also witnessed robust growth. The management reiterates double-digit growth target for FY26. It also believes pricing across various nodes has stabilised and that market leadership should translate into more gains.
According to Bloomberg, 11 of the 17 analysts polled post-Q1FY26 are bullish while three each are either neutral or bearish. Their average one-year target price is ₹4,047.59 for the stock, which closed at ₹3,756 on the BSE on Tuesday, registering a gain of 2 per cent over three sessions after the results were announced last Thursday evening.
