CUMMINSIND - Cummins India Ltd. Share Price

Cummins India Limited management provided an optimistic outlook for FY 2025-26, anticipating double-digit revenue growth driven by strong domestic demand. Sales for FY 2024-25 reached INR 10,166 crores, a significant 15% increase compared to the previous year, supported by an 18% rise in domestic sales. The company expects Power Generation, Industrial, and Distribution segments to contribute substantially to this growth.

Key forward-looking points include:

1. Revenue Growth: Management has guided for double-digit revenue growth in FY 2025-26, maintaining a cautiously optimistic stance due to uncertainties related to global trade policies and geopolitics.

2. Sales Breakdown: Domestic Power Generation sales increased to INR 3,844 crores, and the Industrial segment saw substantial growth with sales rising by 29% to INR 1,668 crores.

3. Profitability: Profit before tax for FY 2024-25 was reported at INR 2,496 crores, a 16% increase from the prior year. However, Q4 FY 2024-25 saw a decline in profit before tax to INR 681 crores, reflecting a 3% decrease year-on-year.

4. Segment Performance: The company noted a decline in Powergen sales in Q4 due to the transition to CPCB IV standards, with management estimating current volumes at 80%-85% of prior high CPCB II levels.

5. Guidance Specifics: While the company is positive about domestic demand, management refrained from specifying growth rates for exports, citing ongoing uncertainties.

6. Market Forecast: India's GDP is projected to grow by 6.5% in FY 2026, which is expected to support the business environment.

Overall, while Cummins India faces challenges, the fundamental outlook remains positive, driven by strong demand across various segments.

1. Question from Parikshit Kandpal:
"Regarding Powergen, there's a decline of 7% year-on-year and 31% quarter-on-quarter. Can you elaborate if the drop, particularly in March, was due to tariff uncertainties leading to postponements?"

Answer:
"Yes, Parikshit, the 7% decline in Powergen year-on-year is largely due to pre-buy sales from last year related to CPCB II. In the March quarter, typical Q-to-Q sales diminish after strong Q3. The market now fully has CPCB IV+. These factors contribute to the observed figures. We expect CPCB IV volumes to increase, but they have not yet reached CPCB II's peaks."

2. Question from Mohit Pandey:
"What factors drove the improvement in gross margins? Should we expect this performance to be sustainable into FY '26?"

Answer:
"Our gross margins have improved due to significant efforts in reducing direct material costs and careful pricing strategies. Product mix also played a role. We aim to sustain or enhance these margins moving into FY '26 as we continue to focus on cost-related measures."

3. Question from Umesh Raut:
"What's the demand outlook for the genset business, especially in new segments like data centers?"

Answer:
"The demand outlook is robust across all segments, including residential, commercial, and data centers. We're also seeing inquiries from 'quick commerce' firms. The Powergen business often sees seasonality in summer, leading to increased inquiries. We are actively pursuing opportunities in exports, albeit cautiously due to geopolitical uncertainties."

4. Question from Mohit Kumar:
"There's been a decrease in employee expenses; any one-time benefits impacting that?"

Answer:
"The lower employee expenses this quarter resulted from an actuarial benefit, reclassifications for clearer reporting, and true-up from the previous quarter's variable pay. Year-on-year comparisons reflect our efficiency improvements and leverage from increased volumes, which helped keep employee costs contained."

5. Question from Amit Anwani:
"Despite a strong export performance, you seem cautious about future outlooks. Which geographies could see improvement or decline?"

Answer:
"Europe and Latin America performed well this year. It's tough to predict next year's geography-specific performance due to global uncertainties, trade deals, and tariffs. We are adapting our strategies for each region to mitigate risks while aiming for growth."

6. Question from Shrinidhi Karlekar:
"There seems to be a slowdown in the distribution segment's growth; can you clarify?"

Answer:
"While the distribution business experienced 5% growth this quarter year-on-year, for FY '25, it achieved a 14% full-year growth. The Q4 is influenced by factors such as timing of large orders execution, so we recommend examining the full-year results for a better context on sustained performance."

7. Question from Subramaniam Yadav:
"What's expected driving the double-digit growth you mentioned for FY '26, especially in Powergen?"

Answer:
"We anticipate growth in all Power Generation segments, especially low and medium horsepower, along with the distribution business. While export growth remains uncertain, the domestic demand outlook gives us confidence in achieving double-digit growth in FY '26."