Cummins India Net Jumps 66% On Higher Other Income

The Pune-based Cummins India has reported a 14% growth in its net sales to Rs 1071 crore. The company, which is a leading manufacturer of industrial components such as diesel and natural gas engines for power generation, industrial and automotive components, has also reported a net profit of Rs 234 crore. This profit is an increase by 66%. The company has reported exceptional items of Rs 47.5 crore during the quarter, after it sold the shares of KPIT Cummins Infosystems during the quarter. It now holds 2.68% stake in KPIT Cummins Infosystems down by 5.09%, as reported in September 2012.

Cummins India, earlier, had reported subdued numbers in the Sep 2012 quarter due to the slowdown in the power generation sector. During the Dec 2012 quarter, the company has reported a 13.31% growth in its core engines business to Rs 972 crore. Revenues from the other segment grew by 17.75% to Rs 98 crore. On the sequential basis, the company has reported marginal growth over the September quarter in both the segments.

On the margin front, PBIT margins of the core business expanded by 200 basis points on a YoY basis, while that in the other category increased by about 650 basis points. Overall, its EBITDA margins have expanded by 240 basis points on a YoY basis. This is mainly due to the decline of 2.4% in its other expenses. Employee cost increased by 7.44% to Rs 84 crore which also helped to expand it EBITDA margins. Contribution of the material costs has also declined marginally during the quarter on a YoY basis.

Taxes rose by 41% during the quarter. In absolute terms, it paid a total tax of Rs 75.5 crore with an effective tax rate of 29%. The tax rate is in line with what it paid in the Sep 2012 quarter.

Overall, its net profit has come in higher with the expansion of EBITDA margins which would be seen as a positive by the markets. The markets will give a thumbs-up to Cummins India and one may buy the scrip with a long term horizon.