Latest news with #CPCB4+

Business Standard

Cummins India's growth engines should continue to deliver in FY26

Cummins India 's results for fourth quarter of the financial year 2024-25 (Q4FY25) showed low revenue growth, but strong margins compensated. The company reported 6 per cent year-on-year (Y-o-Y) revenue growth, while Ebitda and PAT declined by 5 per cent and 7 per cent Y-o-Y, prior to adjustment for one-offs, due to a high base effect. Cummins, the country's leading manufacturer of diesel and natural gas engines, will benefit from better volumes for CPCB 4+ products in FY26 as powergen demand recovers further, there is improved growth in railways, and increased penetration of products and improving growth outlook in export markets. Revenue increased 6 per cent Y-o-Y to ₹2,460 crore, but domestic revenue at ₹1,940 crore grew 1 per cent Y-o-Y, while exports at ₹480 crore grew strongly by 39 per cent Y-o-Y. The gross margin at 37.2 per cent saw a 120 basis point (bp) Y-o-Y and 240 bp quarter-on-quarter (Q-o-Q) expansion, while Ebitda margin for Q4FY25 stood at an excellent 21.2 per cent. The absolute Ebitda dipped 5 per cent Y-o-Y to ₹520 crore, and PAT declined 7 per cent Y-o-Y to ₹520 crore. For FY25, the revenue grew 15 per cent Y-o-Y to ₹10,340 crore and Ebitda grew 17 per cent Y-o-Y to ₹2,070 crore, and PAT grew 15 per cent Y-o-Y to ₹1,910 crore, while Ebitda margin expanded 30bp Y-o-Y to 20 per cent. The company's operating cash flow (OCF) and free cash flow (FCF) increased 32 per cent and 46 per cent Y-o-Y respectively to ₹1,690 crore and ₹1,460 crore due to lower net working capital. As of 31st Mar'25, Cummins India was debt-free. The company has three key businesses namely, engines, power systems and distribution. Powergen segment revenue declined by 7 per cent Y-o-Y in Q4FY25, affected by a high base of last year. The Q4FY25 volumes were around 80-85 per cent of Q4FY24 level. For FY25, powergen revenue grew by 14 per cent Y-o-Y, implying some of the volume decline due to CPCB 4+ transition was offset by pricing improvements. Given competitive intensity stabilising and demand recovering from key areas like residential, commercial, and infrastructure, volume growth may recover in FY26. Beyond CPCB 4+, KKC sees strong demand from data centres with a likely compounded annual growth rate (CAGR) of 16.5 per cent in powergen revenues during FY25-27. Management confirmed that demand remains robust across residential, commercial, infrastructure, and quick-commerce warehouses and data centres. Industrial segment delivered a healthy Q4FY25, posting ₹3,800 crore in revenue (up 9 per cent Y-o-Y), and ₹1,700 crore in FY25 (up 28 per cent YoY), reflecting broad-based demand. Momentum is building around specialised applications such as hotel load converters and accident relief trains. The compressor business is steady but anticipated to enter a cyclical downturn. Given a wide product portfolio, high teens growth can be expected across the industrial portfolio. The distribution segment revenue grew by 5 per cent Y-o-Y in Q4FY25 and by 14 per cent Y-o-Y in FY25. The segment benefited from long-term contracts, value-added services, and aftermarket support. Export revenue surged 39 per cent Y-o-Y in Q4FY25. Latin America and Europe continued to perform exceptionally. Management is cautiously optimistic about exports for FY26. Management attributed modest growth in distribution to order timing and project execution schedules. Key drivers included extended warranties, rebuild engine orders (especially in industrials), and retrofit solutions like dual-fuel kits. The company remains confident about future growth in this segment, supported by higher penetration and value-added offerings. Overall, Cummins India has guided for double-digit revenue growth in FY26. This will be driven largely by domestic demand across powergen, industrial, and distribution segments. Cummins is a market leader in diesel gensets. Domestic demand is expected to stay robust while exports seem to be seeing gradual recovery given the current geopolitical scenario, and uncertainty. The company has been able to hold onto pricing post CPCB 4+ and increased competitive intensity. Most analysts seem positive on the stock, which has risen nearly 10 per cent over two sessions post Q4, and the guidance is seen as conservative and credible.