Recommendation from Automobile & Ancillaries Sector

This column gives you scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year. [EasyDNNnews:PaidContentStart]

Cummins India : POWERING GROWTH WITH ENERGY SOLUTIONS

HERE IS WHY
✓  Strong Growth Momentum
✓  Innovative Product Portfolio
✓  Consistent dividend Payout

The India Industrial Engines Market, valued at USD 6 billion in 2025, is projected to reach USD 8 billion by 2031, growing at a CAGR of 6.61 per cent. Growth is being fuelled by rapid industrialisation and large-scale infrastructure development across the country. Additionally, power generation remains a key driver. Considering these factors, we recommend Cummins India as our Choice Scrip. It is a subsidiary of the global Cummins Group and is among the country’s leading manufacturers of engines and power solutions.

The company operates through four key segments: Engines, Power Systems, Components, and Distribution. The company’s engines cater to diverse industries, including railways, marine, construction, compressors, mining, oil and gas, defence, and pumps. The company designs, manufactures, distributes, and services diesel and alternative fuel engines from 2.8 to 95 litres, as well as diesel and alternativefuelled generator sets of up to 3,000 kW (3,750 kVA), along with related components and technology. The Engine Business Unit focuses on advanced diesel and natural gas-powered engines, while the Power Systems Unit provides high-horsepower engines and integrated generator sets for commercial, industrial, mining, marine, and defence applications. The Components Unit includes filtration, turbo technologies, emission solutions, and fuel systems, while the Distribution Unit offers sales, service, and support across India.

The company also operates a lubricants division through its 50 per cent joint venture in Valvoline Cummins Pvt. Ltd., marketing products under the Valvoline brand. In Q1 FY26, 81.6 per cent of the revenue came from the Engine segment, while the remaining 18.4 per cent was contributed by the Lubricants division. On the geographical front, 82.9 per cent of the revenue came from India, while the remaining 17.1 per cent was contributed by international markets.

In Q1 FY26, on a consolidated basis, the company reported revenue of ₹2,907 crore, an increase of 25.5 per cent YoY compared to ₹2,316 crore in the same quarter last year, and up 17.7 per cent sequentially. Net profit stood at ₹604 crore, rising 30.5 per cent YoY from ₹463 crore and 14 per cent QoQ.

In FY25, the company launched various products to meet the evolving needs of modern data centres. These innovations supported robust growth in the Power Generation market, which was driven by strong activity in sectors such as data centres, real estate, manufacturing, infrastructure, quick commerce, hospitals, airports, roads, and pharma.

On the exports front, the company introduced 38L and 50L uprated electronic engines for the North America and Central America (NACA) markets, supported by strong demand for high horsepower (HHP) PowerGen products from NACA and low horsepower (LHP) products from Latin America, Europe, and the Middle East. Cummins also launched new products in the high horsepower range and introduced its Battery Energy Storage System (BESS) solution in India.

On the valuation front, the company’s shares are trading at a PE of 49x, compared to the industry average of 43.5x and its three-year median of 41.9x. The company’s PEG ratio of 1.41 is broadly in line with the industry median of 1.39, suggesting reasonable valuation relative to growth. Over the past three years, the company has delivered sales growth of 19 per cent and profit growth of 34.9 per cent, demonstrating strong operational performance. The shares of the company offer a dividend yield of 1.37 per cent. Considering these factors, we recommend a BUY on Cummins India.

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