Goldman Sachs Views on Cummins

Goldman Sachs is Bearish on Cummins

Goldman Sachs has given its views on Cummins and have given a sell call on the stock. This decision is based on its interaction with Cummins and it has quoted Cummins management in its report. It says that Cummins management has stated that the quarter ending December is likely to see further correction in channel inventory, resulting in a muted top-line growth. The management stated that the growth slowdown is likely to be more severe this year. Management also stated that it is because of this sales slowdown that it lowered its FY12 guidance to 5- 10 per cent from 10-15 per cent following Q3’FY12 results. As a result, utilizations currently are also low at close to 14 engines per day versus the average of close to 18-20 seen until the second quarter. Though a weaker rupee is beneficial for exports and may result in short-term currency gains, management stated the same may not be sustainable as export prices may be renegotiated at the end of the quarter. On competition, management acknowledged that some of its international peers operating in India are very aggressive in pricing. Management sees input cost prices as a key risk and does not perceive the possibility of an increase in selling price without impacting volumes. Maintain Sell.

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