Cummins India Q2 Results Good Frontline stock

Cummins India, the largest engine maker has posted good Q2 results with topline rising to Rs.808 crores (Rs.540 crores in corresponding quarter of previous year) registering a growth of about 50%. This can definitely be termed as an excellent growth considering the situation prevailing in capital goods, automobiles and manufacturing sector. PBT also risen by about 42% to Rs.128.95 crores against Rs.91.10 crores. Net profit also rose by 41% from Rs.66.48 crores to Rs.93.82 crores resulting in an EPS of Rs.4.74 for the quarter against Rs.3.36 of Q2 FY 08.

The growth has been linear and H1 of FY 09 had a topline of R.1,540 crores (Rs.1,095 crores) with PBT of Rs.250 crores (Rs.180.45 crores) and PAT of Rs.182 crores against Rs.130 crores of H1 FY 08. EPS is placed at Rs.9.20 against Rs.6.59 for first half of FY 09.

It may get noted that the EBIT margin has slipped to 13% for the quarter against 14.60% of the corresponding quarter in the previous year. And this reduction of 1.60% is instrumental in fall of bottomline relatively lower than the topline growth. But considering the present trend of margin pressure being faced by capital goods manufacturers, this kind of erosion in margin pressure is acceptable and understandable. The rise in topline is quite healthy, which gives a lot of confidence to the investors for future performance of the company. One can safely assume a growth of 35% in topline while a rise of 30% in bottomline for FY 09 and FY 10.

Inspite of such a good performance, the share price has corrected to Rs.225 and were down by over 6% with a fall of Rs.15. At the current price share rules at a PE of about 11 times and it is the PE multiple correction happening in the stock on the lines of the whole market and all other frontliners. thanks