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Cummins India stock tanks 7% on weaker than expected earnings

Exports sales for the year ended March 31, 2021 stood at Rs 1,153 crore, down 11 per cent over the sales of Rs 1,291 crore recorded last year

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Share of Cummins India slipped 7 per cent to hit an intraday low of Rs 747.10 in early trade after the company reported weaker-than-expected earnings.

The company reported a net profit of Rs 168.56 crore for the quarter ended March 2021 compared to Rs 170.24 crore in the year-ago period.

Total income grew 16.4 per cent to Rs 1,314.78 crore in the March quarter against Rs 1129.48 crore in the December quarter.

Exports sales for the year ended March 31, 2021 stood at Rs 1,153 crore, down 11 per cent over the sales of Rs 1,291 crore recorded last year.

The share opened 2 per cent lower at Rs 787.70 against the previous close of Rs 803.20. It has gained 130.5 per cent in the last 12 months and risen 38 per cent since the beginning of this year.

Cummins share stands higher than 100 day, 200 day moving averages, and lower than 5 day, 10 day, 20 day, 50 day moving averages. Market cap of the firm fell to Rs 22,037.40 crore.

Nomura noted that the March quarter results missed estimates operationally on weaker than estimated exports. The brokerage house is 'neutral' on the stock with a target at Rs 650 per share.

"Economic activities and business sentiment picked up from Q2 FY'20. This, coupled with pent-up demand, saw revenue growth recovering from Q2. Government spending on infrastructure and continued strength in Industrial and Powergen segments helped in sequential recovery up to Q3. The onset of the second wave of COVID-19 in March 2021 has impacted overall economic recovery," said Ashwath Ram, Managing Director, Cummins India Limited.

"With vaccinations likely to pick up in coming weeks, case rates should decline, so we expect the economy to recover from the end of Q2 FY'22 and we expect quarterly improvement. We continue to closely monitor our end markets and are well prepared to scale when the economy picks up," he noted.

"COVID-19 impacted our export business as well. Demand started to show a gradual improvement in Q3 FY'21. As vaccination rates pick up globally, economic activities are restarting, and we believe most of our end markets will fully recover in FY 22," he added.

In its outlook for the next fiscal year, India Cements expects a very gradual recovery of demand in upcoming quarters.

As market conditions continue to remain uncertain and visibility for end-market recovery is still somewhat limited, the company is not providing a full-year revenue guidance for FY 2022.