>CUMMINS INDIA LIMITED (RELIANCE MONEY)

Exports likely to dip

Cummins India Ltd (CIL) reported better than expectation results for Q4FY09 on a standalone basis. Results for Q4FY09 are not comparable as CSS and CASL are amalgamated with CIL in Q4FY09 results. On a comparable basis CIL reported decline in net profit by 12% as per guidance given by the management. We recommend a Reduce.

■ Standalone net sales grows by 54% y-o-y in Q4FY09
CIL’s standalone revenue reported growth of 54% y-o-y for Q4FY09, which is better than our expectations. The results for Q4FY09 are not comparable with Q4FY08 mainly because of amalgamation of CSS and CASL in CIL. It reported revenue of Rs.10.71bn for Q4FY09 fuelled by growth in engines segment which grew by 31% y-o-y and others segment grew by a whopping 1630% y-o-y. Domestic sales jumped 54% y-o-y to ~Rs.7,437mn and exports went up strongly
by 54% y-o-y to Rs.3,276mn. But the management has indicated that there could be a severe drop in exports revenue in FY10E. However on the positive side, domestic markets have started picking up during last two months. We expect with the focus on infrastructure projects by new government, there will be increase in domestic demand for CIL’s products in near future.

■ Smart jump in standalone EBITDA margins by 258bps y-o-y
Because of favorable product mix and decline in raw material cost by 431bps yo-y, CIL’s EBITDA jumped by 81% y-o-y to Rs.1,821mn and EBITDA margins went up by 258bps y-o-y to 17% for Q4FY09. For FY09, its standalone EBITDA went up by 208bps y-o-y to 17.6%. On a consolidated basis CIL’s EBITDA margins came down marginally by 24bps y-o-y to 17% mainly due to rise in other expenditure during FY09. Net profit on a consolidated basis for CIL went up by 43% y-o-y to Rs.4,629mn and its segmental results suggest it earned healthy ROCE of 47% on its engines business.

To see full report: CUMMINS