Cummins India Share: The morning of Thursday, November 5 in the stock market brought big losses for the shareholders of Cummins India. As the market opened, the company’s shares were under such selling pressure that the price fell more than 13 percent. The reason behind this sharp decline is the company’s September quarter (Q2 FY27) results. The figures presented by the company were far behind the estimates of market experts. Notably, the stock, which looked like a good buy till a day ago, completely reversed its trend as soon as the quarterly results came in.
Sales rose but were below market expectations
If we look at Cummins India’s results, revenue from operations on a stand-alone basis grew by 4.1 percent year-on-year. In this quarter, the company’s revenue was Rs. 3,301 crore, compared to Rs. 3,171 crores. Although the sales increased on paper, the market was expecting much more than this. In an analyst poll, revenue at Rs. 3,536.5 crore was estimated. The actual figure turned out to be 6.66 percent lower than this estimate.
Along with the business within the country, the pace was slow in the foreign market as well. The company’s domestic sales grew by 5 percent year-on-year to Rs. 2,692 crore has been done. While export sales increased by only 2 percent to Rs. 555 crore has happened. Growth was very modest on both fronts, dampening investor enthusiasm.
The pressure deepens from operating margins to profits
The biggest shock to the quarterly results came at the operating level. The company’s operating profit ie EBITDA declined by 27.13 percent year-on-year to Rs. 507 crores. In the same quarter a year ago, this figure was Rs. 695.75 crores. Market experts Rs. 690 crore were expecting EBITDA, but the actual number was 26.52 percent below the estimate.
On the margin front the picture looked quite poor. The EBITDA margin of the company was 21.94 percent in the September quarter last year, which has declined by 658 basis points to 15.36 percent this time. If you understand in simple language, last year the company made every Rs. 100 at Rs. 21.94 crore in operating profit, which has now come down to just Rs. It has arrived at 15.36. The market had estimated a margin of 19.51 percent, making the actual figure 415 basis points lower.
This reduction in margins had a direct impact on the net profit (PAT) of the company. Cummins India’s profit fell by 26.69 percent year-on-year to Rs. 467 crores. In the same quarter last year, the company posted Rs. 637 crore in net profit. In an analyst poll, the profit was Rs. 625.5 crore, but the company’s performance fell short of expectations by 25.34 percent. Despite a slight increase in revenue, this drop in profits put heavy pressure on the stock.
The company’s calculations worsened due to cost overruns
Finally, the management has clarified the position as to why the company’s margins have fallen so much despite the increase in sales. According to the company, rising commodity prices had a direct impact on costs in the September quarter. Costs have increased due to the cost of raw materials used in manufacturing goods.
Apart from this, the management has given two other main reasons. The first reason is the increase in freight costs. Another reason was the change in product mix, which means that the share of different products in total sales has changed. These three factors combined reduced the company’s profit margins.
