Cummins India delivered a mixed performance in the June quarter, with total revenue from operations surging 18% year-on-year to ₹3,426 crore from ₹2,907 crore in the year-ago period, reflecting healthy demand across key domestic businesses. However, net profit declined 8% to ₹543 crore, falling well short of Street expectations and contrasting with the company's strong Q4 FY6 results where it reported a consolidated net profit of ₹563.41 crore with a 28.30% year-on-year increase. The company's EBITDA slipped 1.2% to ₹616 crore, while operating margin contracted sharply to 17.97% from 21.46% a year ago, also below analysts' expectations. This performance reflects the challenging operating environment the company faces despite strong top-line growth, with EBITDA margin falling to the lowest level in the last 10 quarters.
The company announced that Managing Director Shveta Arya has resigned effective August 31, 2026 to pursue external opportunities. Arya was appointed as Managing Director on September 1, 2024 for a three-year term and her resignation was submitted on August 5, 2026. In her resignation letter, Arya stated "I hereby tender my resignation as Managing Director and Director of Cummins India Limited, with effect from August 31, 2026, to pursue external opportunities." The board accepted her resignation and placed on record its deep appreciation and gratitude for her leadership and valuable contributions during her tenure. The company is currently evaluating suitable candidates for the position and will inform stock exchanges upon completion of the appointment process. In an interaction with CNBC-TV18 on May 29, Arya had highlighted that the second and third quarter will be key to watch this financial year due to the current geopolitical tensions, warning of no improvement in exports this quarter which was evident from the flat sales growth.
The quarterly results highlight a significant divergence between revenue expansion and profitability, with revenue exceeding estimates at ₹3,426 crore, beating the ₹3,217 crore estimate by 6.5%. However, EBITDA stood at ₹617 crore, 7% below the ₹663 crore estimate, while EBITDA margin was 18%, missing the 20.7% estimate by 270 basis points. Adjusted profit stood at ₹543 crore, 9% below the ₹597 crore estimate. The biggest concern was gross margins, which fell to 33.5%, the lowest in nearly 13 to 14 quarters, as higher commodity costs and supply chain disruptions pushed material costs up to 66.5% of revenue from 63% a year ago. Domestic sales came in at ₹2,854 crore, up 22% compared with the year-ago quarter and 14% higher than the previous quarter, demonstrating strong underlying demand. Export sales stood at ₹521 crore, remaining flat on a year-on-year basis while rising 16% sequentially, showing sequential improvement despite year-on-year challenges. Robust domestic Power Generation demand grew 35% YoY to ₹14.2 billion, supported by manufacturing, infrastructure, mining and robust hyperscaler-led data centre demand.
The company's data centre segment emerged as a standout performer, with revenue surging 135% year-on-year in Q1FY27, now accounting for about 17% of total revenue, up from 8% a year ago. This robust demand from data centres is expected to boost Cummins' distribution business—which caters to after-sales services, spare parts and related support—over the next two to three years, according to management during the earnings call. The management indicated that it implemented a price hike in early July and will take further action depending on customer response to address margin pressures. Exports could also recover, as Cummins has secured board approval for related-party transactions (RPT) worth ₹3,000 crore for FY27—56% higher than FY26 RPT approvals. Over the past two years, actual RPTs have been 1.3-1.4 times the approved amount, providing a potential growth avenue despite current geopolitical headwinds.
Prabhudas Lilladher upgraded its rating from 'Reduce' to 'Hold' with a target price of ₹5,323 (revised from ₹5,133 earlier), citing the recent correction in stock price and encouraging medium-term demand outlook. Jefferies maintained its Buy rating but cut the target price to ₹6,700 from ₹7,100 after commodity costs weighed on June-quarter margins, prompting the brokerage to lower its earnings estimates. JPMorgan stayed Neutral with a target price of ₹5,882, questioning whether the company's period of elevated margins has run its course. Citi and HSBC maintained Buy ratings with target prices of ₹6,700 and ₹6,500 respectively, expecting pricing increases and growth from data centres to support margins ahead. Nomura Global Markets Research revised its FY27 EBITDA guidance downwards marginally by 1% while increasing its revenue projection by 4%, noting that margin recovery will hinge on the company's pricing actions and the inflationary environment. Nuvama Institutional Equities expects Cummins India to deliver 15-16% earnings per share CAGR while valuations remain stretched at 57x and 47x FY27 and FY28 price-to-earnings ratio, capping an upside.
