Midcap Stock To Buy: Rallies 5.14%, Hit 52 Week High, Jumped 400% In 3 Yrs, Recommends 650% Dividend

Leading brokerage firm HDFC Securities assigned a Buy on Cummins India Ltd. (CIL) with a target price of Rs. 1,880 apiece. The brokerage sees a 9% potential upside from its current level. On May 24, 2023, the Board recommended 650% final dividend for the financial year that ended on March 31, 2023. Cummins India is an Engineering sector midcap stock with a market capitalisation of Rs. 48,095.59 crore.

Recommends 650% Dividend

According to the regulatory filing by the Board of Directors of Cummins India Ltd., "the Board of Directors have recommended Final Dividend of Rs. 13/- (650%) per equity shares on 277,200,000 equity shares (Face Value Rs. 2/- each fully paid up) for the financial year ended on March 31, 2023, in addition to the interim dividend of Rs. 12/- per share declared on February 08, 2023. The said final dividend, if approved by the Members at the Annual General Meeting, will be paid on August 31, 2023."

Strong performance

According to HDFC Securities, Cummins India Ltd (CIL) delivered a positive surprise with quarterly revenue/EBITDA/PAT at INR 19.2/3.3/3.2bn, beating our estimates by 7/15/33%. On a full-year basis, these were the highest ever. CIL is seeing strong pre-buy for its below 800kW power gensets as the CPCB 4+ norm will become effective from 1 July 2023. CIL, however, has only 20% of its portfolio above the 800kW rating.

All its products under 800kW are undergoing significant change with electric components and better power density and system control than their mechanical counterpart. These products are expected to cost 20-50% higher. The export market is also robust with lower HP product sales in FY23 recording a growth of 40% YoY compared to 11% YoY growth in High HP products. Also, CIL has introduced its next iteration of Fit-For-Market 3.0 products, catering to the region and application-specific products for the export market. In CY24, CIL expects to ramp up its manned capacity, which is currently at a utilisation level of 90% as against its installed capacity utilisation of 60-65%.

"CIL has multiple tailwinds, namely, stringent upcoming norms, Capex cycle recovery, adoption of alternative fuels with lesser carbon footprint, revival in industrials and supporting manufacturing policies. We maintain BUY, with an unchanged SOTP of INR 1,880 (35x Mar-25 EPS)," the brokerage has said.

Stock Outlook - Current Market Price & Returns

The stock's current market price is Rs. 1,735.05 apiece, up 5.14% from its previous close of Rs. 1,650.15 apiece. It hit new 52 week high on 26 May 2023 at Rs. 1,740 apiece and 52 week low on 20 June 2022 at Rs. 950.85 apiece, respectively.

The stock gave 5.82% positive return in 1 week. It gave 10.83% positive return in 1 month and 10.43% in 3 months, respectively. It has given 68.74% positive return in 1 year, 409.19% in 3 years and 147.23% in 5 years, respectively.

Disclaimer - The stock has been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.