>CUMMINS INDIA LIMITED: Expansion at Phaltan Megasite to fuel Cummins future growth Engine

■ Substantial Revenue growth despite multiple headwinds: Despite of high interest rates and commodity prices coupled with uncertain global environment, the company has been growing at a CAGR of 16.47% for the last 5 years. It is poised to grow at a CAGR of 14% for the next 5 years with improved outlook on export demand and substantive growth across all segments, particularly in segments like power generation and industrial business which contribute around 45% and 20% to the total revenue respectively.


■ New products to aid to future growth; Margins bottoming out: Cummins elasticity of adopting the new technology and using the same efficiently will help the margins to bottom out. It will significantly benefit from the enhanced products built‐in with new emission power generation norms and industrial engines due to superior product development capabilities. Hence, with the improving demand scenario and correction in commodity prices, there will be an upside in EBITDA margins, going forward.


■ Expansion at Phaltan Megasite to fuel Cummins future growth Engine: Cummins is well placed with its expansion initiatives at Megasite, Phaltan. It constitutes almost 10 facilities in total, out of which 4 are operational and remaing would be operational by 2016 and contribute additional INR1500 crores to the overall revenue. The 2 operational facilities namely Upfit centre & MIDC SEZ would add up annual capacity of 20,000MW & 51,000MW respectively.


■ Power Generation Business to act as power booster: The company expects the Power generation business to grow at a CAGR of 12‐15%% over the next five years. The growth will be mainly driven by 1) market growth 2) LHP export opportunity at MIDC SEZ 3) larger penetration in the domestic LHP market (though might come at lower margins) and 4) tapping the bio mass opportunity. The company anticipates some pre‐buying behavior to show up before the change in the emission norms in July 2013 which would contribute heavily to the revenues. Cummins is confident that it will be able to penetrate the market much better post the norm change, given its technology leadership and readiness with the product to meet the revised needs of the customers


■ Cummins‐Cash enriched and Steady Balance Sheet: The Company has enough cash to carry on its future operation and expansions. It has strong balance sheet with healthy reserves and low debt.


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