Cummins India shares fell by as much as 6% on May 30 after the company gave a cautious outlook during its earnings call. The drop comes despite the stock having doubled in value over the past year, rising 105%.
The company, which makes diesel and natural gas engines, told analysts that rising global metal prices are making it harder to maintain profit margins.
This cautious outlook followed a strong earnings report for the quarter ending in March 2024. Cummins India reported a 50% increase in net profit to Rs 530.5 crore, driven by strong demand both domestically and internationally. Revenue grew by 19.9% year-on-year to Rs 2,319 crore.
Despite the cautious outlook, Macquarie remains positive on the stock, keeping an ‘Outperform’ rating with a target price of Rs 3,600 per share. Macquarie highlighted the company’s strong domestic business growth and improved margins.
Nomura, however, is more reserved, maintaining a ‘Neutral’ rating with a target price of Rs 3,040. Nomura noted that Cummins India exceeded profit expectations by 51% and reported a surprising EBITDA margin of 23.5%, thanks to growth in the High Horsepower (HHP) segment and lower pig iron prices.
Cummins India’s board also approved an interim dividend of Rs 20 per share, in addition to an earlier dividend of Rs 18 per share declared in February 2024.
At 1:25 pm, Cummins India shares were trading 5.5% lower at Rs 3,624 on the National Stock Exchange. Despite the recent drop, the stock has still gained over 80% this year, far outpacing the Nifty’s 3.8% return.
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