Cummins India-Buy Cummins India; target Rs 685: Firstcall Research

Firstcall Research is bullish on Cummins India (CIL) and has recommended buy rating on the stock with a target of Rs 685 in its September 12, 2011 research report.

"Cummins India (CIL) incorporated in the year 1962, is a leading manufacturer of diesel and natural gas engines. Cummins India Ltd has proposed Issue of fully paid Bonus Equity Shares in the ratio of 2:5. During the quarter ended, the robust growth of Net Profit is increased by 26.34% Rs 1771.70 million. Net Sales and PAT of the company are expected to grow at a CAGR of 21% and 20% over 2010 to 2013E respectively. Cummins India Ltd. is comprised of four business units: Industrial Engine, Distribution, Automotive and Power Generation."

"Cummins India Ltd. has reported net profit of Rs 1771.70 million for the quarter ended on June 30, 2011 as against Rs 1402.30 million in the same quarter last year, an increase of 26.34%. It has reported net sales of Rs 10453.10 million for the quarter ended on June 30, 2011 as against Rs 9279.40 million in the same quarter last year, a rise of 12.65%. Total income grew by 13.18% to Rs 10611.60 million from Rs 9375.90 million in the same quarter last year. During the quarter, it reported earnings of Rs 8.95 a share."

"At the current market price of Rs 596, the stock is trading at 24.30 x FY12E and 21.45 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs 24.53 and Rs 27.78 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 21% and 20% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 17.26 x for FY12E and 15.27 x for FY13E. Price to Book Value of the stock is expected to be at 6.60 x and 5.05 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend Buy in this particular scrip with a target price of Rs 685 for Medium to Long term investment," says Firstcall research report.