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Domestic outlook intact while cautious on exports

Quick Pointers:

* Domestic powergen revenue grew ~50% YoY to Rs13.4bn driven by strong execution of data center orders and robust growth in core Powergen.

* Exports grew by ~24% YoY to Rs5.5bn however management cited softness ahead due to inventory correction in market

Cummins India (KKC) delivered a strong quarterly performance with revenue growing 27.2% YoY and EBITDA margin expanding by 261bps YoY to 21.9%. Management guided for double-digit FY26 growth, supported by continued strength in Powergen, while exports are expected to remain muted amid inventory correction. Powergen growth was led by strong execution of data centre orders (40% of Powergen sales) and steady traction across infrastructure, manufacturing, airports, and healthcare propelling core power gen segments (+20% YoY). Industrial performance was impacted by extended monsoons and softer mining demand, partly offset by strength in railways. Export demand remained firm in Europe and the Middle East, though near-term softness persists. Competition in the LHP has intensified, meanwhile KKC maintains leadership in HHP and remains well positioned for sustained growth, aided by strategic investments and expanding opportunities in hyperscale data centers. The stock is trading at a P/E of 47.0x/41.8x FY27/28E. We roll forward to Sep’27E and maintain our ‘Hold’ rating valuing the stock at a PE of 43x Sep’27E (43x Mar’27E earlier) with revised TP of Rs4,172 (TP of Rs3,895 earlier)

Long term view: We expect Cummins’ outlook to remain intact given 1) strong domestic demand in Powergen across sectors with CPCB 4+ products witnessing traction, 2) maintain margin profile and 3) ample room for growth in the Distribution business.

Strong volume growth led to margin expansion: Standalone revenue increased by 27.5% YoY to Rs31.2bn (PLe: Rs28.6bn) led by robust execution. Gross margin expanded by 75bps YoY to 36.5% (PLe: 36.5%). EBITDA increased by 44.4% YoY to Rs6.9bn (PLe: Rs5.8bn) with EBITDA margin expanded by 261bps YoY to 21.9% driven by better operating leverage and gross margin expansion. PBT(ex. Extra ordinaries) increased by 41.2% YoY to Rs8.4bn (PLe: Rs6.9bn) aided by higher other income (+21.9% YoY to Rs2bn). Adj.PAT increased by 41.5% YoY to Rs6.4bn (PLe: Rs5.2bn) driven by increase in other income and marginal decrease in effective rate to 24%.

Strong domestic growth aided by powergen : Domestic sales grew by 28.3% YoY to Rs25.8bn driven by Powergen (+50% YoY) and Distribution (+21% YoY) while Industrial segment declined by -5% YoY. In Q2FY26 Domestic powergen revenue mix stood at 66%/7%/19%/7% for HHP/HHD/MHP/LHP. Exports increased by ~24.0% YoY, to Rs5.5bn. Export mix stood at 40%/51%/9% for LHP/HHP/Spares in Q2FY26.

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