Broker’s Call: Cummins India (Buy)

Target: ₹6,400

CMP: ₹5,230

Our recent meeting with the Cummins management suggests a strong data centre-led demand scenario for HHP gensets. This will continue to support growth despite the non-HHP segment growing at a slower pace. Volatility in RM prices suggests more price hikes will be needed in the coming months over and above the recent price hike in July 2026. We believe the growth drivers for Cummins remain: Data centres for powergen; railways, mining, defence and marine for industrial despite construction being weak; higher installed base and customised offerings in distribution; and Europe and Asia-Pacific regions for exports despite the weak West Asian market.

Margins were a bit soft in Q1FY27 due to a spike in commodity prices, revenue mix and true-up of employee costs. The company intends to maintain margins at 20-21 per cent. We expect EBITDA margins of 19.8 per cent/21.3 per cent/21.5 per cent for FY27/FY28/FY29. We expect a revenue/EBITDA/PAT CAGR of 18 per cent/ 18 per cent/19 per cent over FY26-29. We trim our estimates by 4.7 per cent/2.5 per cent/2.2 per cent for FY27/FY28/FY29 to factor in the near-term pressure on margins.

The stock currently trades at 52.8x/41.5x/35.1x P/E on FY27/FY28/FY29E EPS. We reiterate our BUY rating with a revised TP of ₹6,400 (vs ₹6,500) based on an average of 45x P/E and DCF on two-year forward estimates.

Key risks include lower-than-expected demand in key segments, higher commodity prices, increased competitive intensity and a lower-than-expected recovery in exports.

Published on August 25, 2026