Cummins India jumps 5% on healthy Q3, analysts positive on long-term growth

Cummins India's profit after tax rose 11.9 per cent Y-o-Y to Rs 558.5 crore in Q3FY25, compared to Rs 498.9 crore in Q3FY24. Revenue grew 21.8 per cent to Rs 3,096.2 crore in Q3FY25

Diesel and natural gas engines manufacturer Cummins India’s stock surged 5.36 per cent on Thursday, February 6, 2025, to an intraday high of Rs 3,075.95, following a strong third-quarter performance that surpassed market expectations. 

 

The healthy performance was largely attributed to resilient sales, particularly in the high horsepower (HHP) power generation segment, which benefitted from strong demand from the data centre market. 

 

Additionally, the company saw growth in its distribution business, along with a recovery in industrial and export segments. However, analysts noted that despite strong performance, gross margins were lower than expected due to a challenging product mix and heightened competition in the market.

 

 

Nomura’s analysts pointed out that while Cummins India's growth was impressive, the company’s margin performance was somewhat muted due to a higher share of project business and increasing competitive intensity. Nevertheless, Nomura maintained a ‘Neutral’ outlook with a target price of Rs 3,740, noting that the stock has corrected about 15 per cent in the last three months and currently trades at 36.5x FY26 earnings.

 

In a separate ‘Flash Note,’ Nuvama highlighted Cummins India’s strong year-on-year (Y-o-Y) growth, even on a high base from the previous year, which included a major one-off data centre project. The export business showed consistent growth since Q4FY24, with Ebitda margins in line with the company’s full-year guidance of 19-19.5 per cent. Nuvama also noted that the company’s profit after tax (PAT) exceeded expectations, driven by strong revenue growth and a slightly lower tax rate.

 

InCred Equities echoed this positive sentiment, stating that Cummins India’s performance in Q3FY25 exceeded both their and consensus estimates. The company’s export business saw a strong rebound, growing 43 per cent Y-o-Y. With its diversified product portfolio and solid liquidity position, InCred Equities analysts believe Cummins India is well-placed to continue its profitable growth, maintaining a ‘Hold’ rating on the stock.

 

Financially, Cummins India’s profit after tax rose 11.9 per cent Y-o-Y to Rs 558.5 crore in Q3FY25, compared to Rs 498.9 crore in Q3FY24. Revenue grew 21.8 per cent to Rs 3,096.2 crore, up from Rs 2,541.4 crore in Q3FY24. At the operating level, Ebitda rose 10.1 per cent to Rs 597.6 crore, though Ebitda margins contracted 210 basis points (bps) to 19.3 per cent, down from 21.4 per cent in the same quarter last year.

 

Shveta Arya, managing director of Cummins India, addressed global economic uncertainties, highlighting that while inflation is easing in many countries, the global outlook remains subdued, with US policies expected to impact the global economy in the coming years. 

 

However, Arya expressed hopes about the Indian economy’s recovery, citing strong GST collections and positive economic indicators such as IIP and PMI, which suggest a stable outlook for the year ahead. She stressed that Cummins India is executing its profitable growth strategy, which has led to the highest-ever quarterly revenue, driven by robust demand across all segments.

 

Looking forward, Cummins India remains cautiously optimistic about near-term demand, especially with the adoption of new genset emission norms. The company’s strong portfolio of CPCB IV+ emission-compliant products positions it well to meet customer demand. 

 

With a diversified product portfolio and a strong balance sheet, Cummins India is optimistic about sustained growth, particularly in exports. The company’s access to cutting-edge technology, a trusted brand, and a world-class service network give it a solid foundation to support profitable growth in the future.

 

At 11:20 AM, Cummins India share was trading 1.63 per cent higher at Rs 2,967.15. In comparison, BSE Sensex was trading 0.40 per cent lower at 77,954.78 levels.