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11/09Nomura Adjusts Cummins India's Price Target to 940 Indian Rupees from 805 Rupees, Keeps at Reduce
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Cummins India : Transcript of Q1 FY 2022-23 with Analysts / Financial Institutions on August 11, 2022

08/17/2022 | 07:04am EST

Ref: STEX/SECT/2022

August 17, 2022

The Relationship Manager,

National Stock Exchange of India Limited

BSE Limited,

Exchange Plaza, 5th Floor,

Phiroze Jeejeebhoy Towers

Plot No. C/1, G Block,

Dalal Street, Fort,

Bandra - Kurla Complex, Bandra (East),

Mumbai 400001

Mumbai 400 051

BSE Scrip Code: 500480


Subject: Intimation of transcript of analyst conference call held on August 11, 2022

Dear Sir/ Madam,

With reference to our stock exchange intimation dated August 03, 2022, towards investor/ analyst/ Financial Institution conference call, we are enclosing for your records a copy of the transcript of the said conference call conducted by the Company on August 11, 2022.

Kindly take this intimation on your record.

Thanking you,

Yours faithfully,

For Cummins India Limited


Digitally signed by VINAYA ABHIJIT JOSHI Date: 2022.08.17 16:09:43 +05'30'

Vinaya A. Joshi

Company Secretary & Compliance Officer Encl.: As above.

(This letter is digitally signed)

Cummins India Limited

Registered Office

Cummins India Office Campus

Tower A, 5th Floor, Survey No. 21, Balewadi

Pune 411 045 Maharashtra, India

Phone +91 20 67067000 Fax +91 20 67067015



CIN : L29112PN1962PLC012276

"Cummins India Limited Q1 FY-23 Earnings

Conference Call"

August 11, 2022





Page 1 of 15

Cummins India Limited

August 11, 2022

Moderator:Ladies and gentlemen, good day and welcome to Cummins India Limited Q1 FY2022-23 Earnings Conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing '*' then '0' on your touch tone phone.

Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwath Ram, MD, Cummins India Limited. Thank you and over to you, sir.

Ashwath Ram: Thank you. Good morning, ladies and gentlemen. Thank you all for joining us on this call today. I am Ashwath Ram, Managing Director of Cummins India Limited. I have Ajay Patil, our CFO for Cummins India Limited with me.

As we report first quarterly results for fiscal year 2022-23, we are happy to share strong quarterly results on the back of sustained demand from domestic and exports end markets. We continue to observe strong business activity which is corroborated by steady GST collections and other economic activity indicators.

The revenue growth and profitability however, is moderated to some extent by high inflation, supply chain disruptions caused by geopolitical events and many other factors. Despite these challenges, Cummins India is effectively able to manage the demand due to its strong and globally integrated supply chains.

We continue to remain focused in our efforts on cost control and pricing actions to mitigate impact of high commodity inflation.

Now I would like to share the financial results of Q1 FY23 through this call. For the quarter ended June 30, 2022, with respect to the same quarter last year, our sales at Rs. 1,657 crores is higher by 42% compared to Rs. 1,167 crores recorded in the same quarter last year.

Domestic sales at Rs. 1,172 crores is higher by 36%. Exports at Rs. 485 crores is higher by 58%. Profit before tax and exceptional items at Rs. 278 crores is higher by 63% compared to Rs. 171 crores recorded in the same quarter last year.

For the quarter ended June 30, 2022, with respect to the previous quarter, our sales at Rs. 1,657 crores are higher by 13% compared to Rs. 1,468 crores recorded in the last quarter. Domestic sales at Rs. 1,172 cores are higher by 12%.

Exports at Rs. 485 crores are higher by 14%. Profit before tax and exceptional items at Rs. 278 cores are higher by 14% compared to Rs. 244 crores recorded in the last quarter. Segment wise, break up for the quarter ended June 30, 2022 are as follows.

Page 2 of 15

Cummins India Limited

August 11, 2022

The sales break up by segment. Power generation domestic sales were Rs. 496 crores, a 41% increase over last year and a 5% increase over the last quarter. Distribution business sales were Rs. 416 crores, a 39% increase over the last year and a 13% increase over the last quarter.

Industrial domestic business sales were Rs. 237 cores, a 25% increase over last year and 24% increase over last quarter. Exports. High horsepower exports were Rs. 232 crores, a 36% increase over last year and a 15% increase over the last quarter.

Low horsepower exports were Rs. 202 crores, a 74% increase over the last year and an 8% increase over the last quarter. With this, I now open the session for questions. Thank you.

Moderator:Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Parikshit Kandpal from HDFC securities. Please go ahead.

Parikshit Kandpal: So my first question is on the gross margin. So in earlier calls, you have been highlighting that we have been taking calibrated price actions to mitigate the commodity inflation. So despite that, in this quarter, despite a strong revenue and the strongest probability of high exports in the mix, the mix was in the favor, still we have seen a 300 basis point drop in gross margin. So if you can just explain why did this happened? And whether the price hikes are now adequately covering the gross margins in the ensuing quarter to the extent of 35%, 36%?

Ashwath Ram: Yes. Good question, Parikshit. The biggest factors which are leading to a reduction in material margin are because of significant material cost increases due to commodities. And as you rightly said, we have put in price increases. We are putting multiple price increases into the system. The last tranche of those actually went into effect on 1st of July. There is a lagging effect, almost now a couple of quarters growth of lagging effects until the commodity increases, which went up very, very aggressively and the price increases, which happened in a more controlled and periodic manner until those two equations balance out and catch up.

So that is the main reason why the material margin has dropped. We have also in this quarter had a little bit of a mix impact just based on the products that were sold in the quarter. We think we have enough of those increases in place, and we are starting to see commodities soften in certain areas. So the combination of both those two actions, we should see us catching up in the medium term as far as profitability is concerned.

Parikshit Kandpal: So my second question is, sir, on the acquisition, the global acquisition of Meritor is got concluded. So now the India structure will become more complex. Now you have a more entity, which comes in besides the CTIL, which is already there and listed CIL, so how things will work in India now with this coming in? So how do we intend to benefit? And how will you simplify this complex structure between the two entities, which are directly there in India?

Page 3 of 15

Cummins India Limited

August 11, 2022

Ashwath Ram: You are certainly correct in stating that the structure is going to become even more complicated. We are trying to just figure it out since the completion of the acquisition just happened last week. We are still working out all those mechanics. But the way I look at it from a CIL perspective, it gives us access to more products to be able to sell to customers to offer customers a complete integrated solution.

As you know, in many markets, such as in marine, in defense, in many of the product segments which CIL plays in, there are applications of the products Meritor makes. And so it would give CIL access to those products as well into its portfolio. So that is the way we are looking at it right now, but we will keep you posted in the near future as things become clearer of how we are going to manage the whole integration and how we can maximize the efficiencies across these multiple companies.

Parikshit Kandpal: Sir, just the last question on, I think, 2 or 3 quarters back, you guys mentioned about running from hydrogen prototype, Leh or Ladakh will be running some bus, with the electrolyzer, small electrolyzer to take on for railways and since it is a small steel plant. So any update on those projects? Have you met some reasonable success there? And are there any initial comments on ordering from the prospective customers from those?

Ashwath Ram: Those tenders are still being negotiated so no major progress to report in that space other than more tenders are opening up, and we continue to bid for more of those tenders. We are trying to work with more partners to get into those spaces. So certainly, the activity has intensified. We are setting up more technical resources to start to work on those, but nothing major to announce as of today.

Parikshit Kandpal: Okay. Just one last thing, sir, on the pricing, sorry. When the commodity inflation correct, we are at a certain price level now. So will we have to pass on the benefit to the customer? Is there a price correction? Or are you able to retain some of the pricing actions that we have taken over the last few quarters?

Ashwath Ram: Yes. It is certainly our aspiration to get back to the profitability levels where we had been at in the past. So we are not highly motivated to reduce prices immediately. We want to be able to retain better margins as commodities correct. They are correcting at different paces for different types of commodities. So it is not a very simple one-to-one kind of equation. So we think we will be able to balance that out and help ourselves in improving the margin over the medium term.

Moderator:Thank you. The next question is from the line of Ravi Swaminathan from Spark Capital Advisors. Please go ahead.

Ravi Swaminathan: My first question is with respect to the growth outlook in the domestic market for the Powergen and the steel business, if you can touch upon that, what kind of volume growth can we see for

Page 4 of 15

This is an excerpt of the original content. To continue reading it, access the original document here.


Cummins India Limited published this content on 17 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 August 2022 11:03:02 UTC.

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Sales 2023 73 298 M 900 M 900 M
Net income 2023 9 577 M 118 M 118 M
Net cash 2023 11 672 M 143 M 143 M
P/E ratio 2023 41,3x
Yield 2023 1,46%
Capitalization 400 B 4 908 M 4 908 M
EV / Sales 2023 5,29x
EV / Sales 2024 4,63x
Nbr of Employees 3 167
Free-Float 48,9%
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Ashwath Ram Managing Director & Executive Director
Ajay Shriram Patil Chief Financial Officer
Steven M. Chapman Chairman
Pradheepram Ottikkutti Chief Technical Officer
Vinaya Abhijit Joshi Secretary & Compliance Officer
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