Cummins India Q3 Results: Revenue Down 1.33% YoY, Mixed Brokerage Views

Motilal Oswal has reiterated its Buy rating on Cummins India Ltd. with a revised target price of ₹6,400, down from the previous target of ₹6,500. According to the brokerage report dated August 24, 2026, the revised target is based on an average of 45 times P/E and DCF on two-year forward estimates. The stock currently trades at ₹5,230, indicating an upside potential of 23% from current levels. However, recent developments show mixed analyst sentiment with BofA maintaining an Underperform rating despite raising target estimates, highlighting the divergence between rising earnings estimates and valuation concerns. The stock currently trades at 52.8x/41.5x/35.1x P/E on FY27/FY28/FY29E EPS respectively. Motilal Oswal expects revenue/EBITDA/PAT CAGR of 18%/18%/19% over FY26-29, with EBITDA margins projected at 19.8%/21.3%/21.5% for FY27/FY28/FY29.

Cummins India is experiencing strong and steadily growing demand for power generation equipment, especially from the data center sector, driven by increasing urbanization, digital infrastructure expansion, and the global shift toward cleaner, efficient energy solutions. The company's Power Generation business was recently selected to supply battery energy storage systems for a large U.S. data center project focused on managing AI-driven power demand, adding another dimension to its AI power story. As per The Financial Express, Cummins India meets colocation-based data center needs with locally produced QSK60 engines and supplies 2MW/3MW requirements to hyperscalers with QSK78/95 engines imported from its parent entity. Driven by this high-margin, data center-led demand, Motilal Oswal estimates a 19% revenue CAGR for the powergen segment over FY26–29. Recent management meetings suggest a strong data center-led demand scenario for HHP gensets, which will continue to support growth despite the non-HHP segment growing at a slower pace. This diversification is lifting revenue and supporting higher EBITDA margins, offsetting softness in traditional truck markets and positioning the company as a preferred player in the data center space.

As reported by Motilal Oswal, Cummins India is well-positioned to benefit from strong data center growth, making it one of the preferred players in the data center space. The brokerage identifies several key growth drivers including data centers for power generation, railways, mining, defense, and marine for industrial applications, higher installed base and customized offerings in distribution, and Europe and Asia Pacific regions for exports. Despite construction being weak, these sectors continue to drive demand for the company's products, with the latest Q3 results showing resilience in certain segments despite overall revenue challenges. The distribution segment is poised to grow at a 21% CAGR over FY26–29, driven by a massive and growing installed base, spare parts, telematics, and customised services. Additionally, the launch of Battery Energy Storage System (BESS) solutions in FY26 positions the company to capture opportunities in renewable integration and grid resilience. The industrial segment is expected to achieve a 12% CAGR over FY26–29, backed by complex projects like shipyard marine propulsion and OEM mining orders. Overall export revenues are expected to register a 16% CAGR over FY26–29, led by strong demand for High-Horsepower systems in Europe, Latin America, and the Asia-Pacific regions, with the company already aligning its product lineup to meet evolving global emission standards like Euro 6.

Despite the positive developments, Cummins' share price has pulled back with the 7 day share price return down 8.34% and the 30 day share price return down 11.58%. However, the 1 year total shareholder return of 50.54% points to momentum that has built over a longer horizon. The stock currently trades at ₹5,230 with the revised target price of ₹6,400, indicating potential upside from current levels. According to The Financial Express, Cummins India's share price has fallen 1.5% in the last five trading sessions and dropped 7.7% in the past one month, though it has surged 4.7% in the last six months and given a return of 35.4% over the previous 12 months. Analyst forecasts suggest the stock is valued nearer $748.81 compared to its recent closing price of $587.68, framing the recent pullback in a different light. The divergence between rising earnings estimates and maintained underperform ratings highlights valuation concerns rather than operational ones, with the market appearing to have priced in more optimism than analysts see in the underlying fundamentals.

According to the brokerage report, Motilal Oswal has trimmed its estimates by 4.7%/2.5%/2.2% for FY27/FY28/FY29 to factor in near-term pressure on margins. Key risks to the recommendation include lower-than-expected demand in key segments, higher commodity prices, increased competitive intensity, and a lower-than-expected recovery in exports. The revised estimates reflect the current market conditions and margin pressures affecting the company's near-term performance, while the company continues to navigate weaker North American truck demand and ongoing regulatory uncertainty. As per The Financial Express, margins faced soft performance in Q1 FY27 due to commodity cost spikes, but the company took a price hike in July 2026 to pass on these raw material pressures. The company's management is continuously evaluating commodity costs for additional pricing actions to defend its long-term target EBITDA margin range of 20-21%.