Buy Cummins India Ltd Target Rs.435 - Motilal Oswal

Buy Cummins India Ltd Target Rs.435 - Motilal Oswal

Investment Guru India

Benefits of cost-reduction measures playing out

Deleveraging to continue, but capacity addition on the cards

* JK Lakshmi's (JKLC) operating results were in line, but PAT came in 10% above our estimate led by higher other income. While cost control was strong with per ton cost declining 4% QoQ, it was offset by a 5% QoQ decline in realization. As a result, EBITDA/t declined 10% QoQ (+53% YoY) to INR653. Net debt declined marginally to INR11.5b (1.8x net debt/EBITDA), with the company guiding to cut it further to INR8b in FY21.

* We raise our EPS estimates for FY20/21 by 10%/ 6% to factor in lower costs and higher other income.

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