《CUMMINS_INDIA(KKC_IN)_：N：_KEY_TAKEAWAYS_FROM_MANAGEMENT_MEETING-2013-02-20.pdf》由会员分享，可在线阅读，更多相关《CUMMINS_INDIA(KKC_IN)_：N：_KEY_TAKEAWAYS_FROM_MANAGEMENT_MEETING-2013-02-20.pdf（11页珍藏版）》请在三一文库上搜索。
1、 abc Global Research We recently met with the management of Cummins India Mr. Rajiv Batra, CFO and Mr. Mahesh Narang, COO. In this note, we highlight some of the key takeaways from the meeting. Long term demand outlook remains intact: During the meeting, management reiterated its positive outlook on
2、 demand in the long term and reiterated its medium term guidance of high teen growth in domestic business and low teen growth in exports. Management noted that in the PowerGen business, growth is likely to be driven by continued shortage of power management doesnt see any structural impact on demand
3、 growth in the medium term Cummins remains cautious on margins; focus in 2013 is on penetration in LHP segment, export of new products, CPCB II product launch and cost savings With limited visibility on growth maintain N with TP of INR570 Index BOMBAY SE SENSITIVE INDEX Index level 19,636 RIC CUMM.B
4、O Bloomberg KKC IN Source: HSBC Enterprise value (INRm) 130,890 Free float (%)49 Market cap (USDm) 2,573 Market cap (INRm) 139,640 Source: HSBC 2 Cummins India (KKC IN) Machinery 19 February 2013 abc Financials Cummins expects these shortages to continue in the near term and believes demand will rem
5、ain buoyant. The customer segments, which are doing good in terms of demand growth include: Datacentres, Healthcare, Retail, Pharma and Textile. The segments that are not doing great from demand perspective are: Realty, Mining, Telecom, Autos, and Infra. Management doesnt expect systematic increase
6、in diesel prices to have any material impact on the demand for DG sets, as the demand is more need-based and relatively price in-elastic Currently, management expects prices of DG sets to go up by c15-20% post CPCB II norms. It doesnt expect disruptive pricing strategy from any competitor as of now;
7、 however, believe that we may see some pre-buy effect before the new norms come into effect. The strategy in the PGBU is to increase penetration in the LHP segment (increase channel presence, sourcing, and exports), defend market share in the MHP may see some growth coming back. China, Middle East C
8、ummins expect demand to remain robust in the near term; investing in CRM tools. 4 Cummins India (KKC IN) Machinery 19 February 2013 abc Income Statement and Margin Trend Analysis Income Statement (INRm) FY08 FY09 FY10FY11FY12FY13e FY14eFY15e Net Sales 23,308 33,043 28,449 39,454 40,522 45,375 51,452
9、 58,018 Other operating income 655 774 542 1,157 651 726 1,029 1,160 Total Sales 23,963 33,817 28,990 40,612 41,172 46,101 52,481 59,178 Cost of Goods Sold (COGS) (16,217) (22,338) (18,023)(25,804)(26,454)(28,947) (33,020)(37,085) Gross Income 7,745 11,479 10,968 14,808 14,718 17,154 19,461 22,094 E
10、mployee expense (1,384) (2,130) (1,953)(2,546)(3,039)(3,511) (4,055)(4,683) Selling General therefore, we maintain our Neutral rating on the stock. Potential return equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indic
11、ated. Risks Key risks to our investment case include: Upside risks: ? Continued weakness in the currency; ? Better-than-expected ramp-up of new products; and ? Faster pick-up in demand from the export market. Downside risks: ? Significant appreciation in INR; ? Pick-up in commodity inflation. Cash F
12、low Statement Cash Flow Statement (INR m) FY08 FY09 FY10FY11FY12FY13e FY14eFY15e EBITDA 3,724 5,547 5,815 7,792 6,973 8,573 9,634 10,901 Adjusted for: Unrealized fx (gains)/losses 0 0 0 0 0 0 0 0 Loss on sale of fixed assets (30) (3) (5)2 (1)0 0 0 Other exceptionals 0 0 0 0 0 475 0 0 Change in Worki
13、ng Capital (171) (2,023) 1,436 (1,452)(825)(1,720) (1,875)(2,026) Tax paid (1,206) (1,850) (1,549)(2,181)(2,155)(2,940) (3,046)(3,208) Net Financials 43 20 2 92 96 124 71 44 Others 127 541 63 19 432 0 0 0 Cash flow from operations 2,486 2,232 5,762 4,272 4,521 4,512 4,784 5,712 Capital Expenditure (
14、1,029) (896) (618)(1,479)(2,281)(2,500) (4,500)(4,500) Disposals 0 0 0 0 0 0 0 0 Change in other assets (1,464) 713 (3,340)75 0 0 0 0 Free cash flow (FCF) (6) 2,048 1,803 2,868 2,240 2,012 284 1,212 Dividends (500) (1,858) (1,425)(2,486)(3,023)(2,127) (2,781)(3,350) FCF post dividend (506) 191 379 3
15、82 (783)(115) (2,497)(2,139) Acquisition - Subs/Assoc/Investments 0 0 0 0 1,979 0 2,000 2,700 Change in debt 240 (107) (143)96 (200)0 0 0 Share buyback/issue 0 0 0 0 0 0 0 0 Others 0 0 0 0 0 0 0 0 Net cash flow (266) 84 236 478 996 (115) (497)561 Key cash ratios FY08FY09FY10FY11FY12FY13eFY14eFY15e C
16、ash tax rate 30.5% 31.9% 25.4%27.2%27.9%30.0% 30.0%30.0% Change in WC as % sales -0.7% -6.1% 5.0%-3.7%-2.0%-3.8% -3.6%-3.5% Capex to depreciation 3.1 2.0 1.7 4.0 5.4 5.3 7.7 5.4 Capex as % sales 4.4% 2.7% 2.2%3.7%5.6%5.5% 8.7%7.8% Operating cash conversion 73.2% 43.8% 105.6%57.5%69.0%55.7% 52.9%56.7
17、% FCF Yield 0.0% 4.3% 2.5%2.1%1.9%1.4% 0.2%0.9% FCF Yield post dividend -0.7% 0.4% 0.5%0.3%-0.6%-0.1% -1.8%-1.5% Source: Company Data, HSBC Estimates 7 Cummins India (KKC IN) Machinery 19 February 2013 abc Disclosure appendix Analyst Certification The following analyst(s), economist(s), and/or strat
18、egist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or
19、indirectly related to the specific recommendation(s) or views contained in this research report: Rahul Garg Important disclosures Equities: Stock ratings and basis for financial analysis HSBC believes that investors utilise various disciplines and investment horizons when making investment decisions
20、, which depend largely on individual circumstances such as the investors existing holdings, risk tolerance and other considerations. Given these differences, HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunities based on particular themes or ideas that
21、 may affect the future earnings or cash flows of companies on a 12 month time horizon; and 2) from time to time to identify short-term investment opportunities that are derived from fundamental, quantitative, technical or event-driven techniques on a 0-3 month time horizon and which may differ from
22、our long-term investment rating. HSBC has assigned ratings for its long-term investment opportunities as described below. This report addresses only the long-term investment opportunities of the companies referred to in the report. As and when HSBC publishes a short-term trading idea the stocks to w
23、hich these relate are identified on the website at Details of these short-term investment opportunities can be found under the Reports section of this website. HSBC believes an investors decision to buy or sell a stock should depend on individual circumstances such as the investors existing holding
24、s and other considerations. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations. Investors should carefully read the definitions of the ratings used in each research report. In addition, because research reports contain more
25、 complete information concerning the analysts views, investors should carefully read the entire research report and should not infer its contents from the rating. In any case, ratings should not be used or relied on in isolation as investment advice. Rating definitions for long-term investment oppor
26、tunities Stock ratings HSBC assigns ratings to its stocks in this sector on the following basis: For each stock we set a required rate of return calculated from the cost of equity for that stocks domestic or, as appropriate, regional market established by our strategy team. The price target for a st
27、ock represents the value the analyst expects the stock to reach over our performance horizon. The performance horizon is 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including
28、 the forecast dividend yield when indicated, must exceed the required return by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock must be expected to underperform its required ret
29、urn by at least 5 percentage points over the next 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands are classified as Neutral. Our ratings are re-calibrated against these bands at the time of any material change (initiation of coverage, change of vol
30、atility status or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review, expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarily triggering a rating change. 8 Cummins India
31、(KKC IN) Machinery 19 February 2013 abc *A stock will be classified as volatile if its historical volatility has exceeded 40%, if the stock has been listed for less than 12 months (unless it is in an industry or sector where volatility is low) or if the analyst expects significant volatility. Howeve
32、r, stocks which we do not consider volatile may in fact also behave in such a way. Historical volatility is defined as the past months average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility has to move 2.5 percentage p
33、oints past the 40% benchmark in either direction for a stocks status to change. Rating distribution for long-term investment opportunities As of 19 February 2013, the distribution of all ratings published is as follows: Overweight (Buy) 44% (29% of these provided with Investment Banking Services) Ne
34、utral (Hold) 37% (27% of these provided with Investment Banking Services) Underweight (Sell) 19% (23% of these provided with Investment Banking Services) Share price and rating changes for long-term investment opportunities Cummins India (CUMM.BO) Share Price performance INR Vs HSBC rating history R
35、ecommendation HK The Hongkong and Shanghai Banking Corporation Limited, Hong Kong; TW HSBC Securities (Taiwan) Corporation Limited; CA HSBC Bank Canada, Toronto; HSBC Bank, Paris Branch; HSBC France; DE HSBC Trinkaus 000 HSBC Bank (RR), Moscow; IN HSBC Securities and Capital Markets (India) Private
36、Limited, Mumbai; JP HSBC Securities (Japan) Limited, Tokyo; EG HSBC Securities Egypt SAE, Cairo; CN HSBC Investment Bank Asia Limited, Beijing Representative Office; The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul
37、Securities Branch; The Hongkong and Shanghai Banking Corporation Limited, Seoul Branch; HSBC Securities (South Africa) (Pty) Ltd, Johannesburg; HSBC Bank plc, London, Madrid, Milan, Stockholm, Tel Aviv; US HSBC Securities (USA) Inc, New York; HSBC Yatirim Menkul Degerler AS, Istanbul; HSBC Mxico, SA
38、, Institucin de Banca Mltiple, Grupo Financiero HSBC; HSBC Bank Brasil SA Banco Mltiplo; HSBC Bank Australia Limited; HSBC Bank Argentina SA; HSBC Saudi Arabia Limited; The Hongkong and Shanghai Banking Corporation Limited, New Zealand Branch incorporated in Hong Kong SAR Issuer of report HSBC Secur
39、ities and Capital Markets (India) Private Limited Registered Office 52/60 Mahatma Gandhi Road Fort, Mumbai 400 001, India Telephone: +91 22 2267 4921 Fax: +91 22 2263 1983 Website: This document has been issued by HSBC Securities and Capital Markets (India) Private Limited (“HSBC“) for the informat
40、ion of its customers only. HSBC Securities and Capital Markets (India) Private Limited is regulated by the Securities and Exchange Board of India. If it is received by a customer of an affiliate of HSBC, its provision to the recipient is subject to the terms of business in place between the recipien
41、t and such affiliate. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. HSBC has based this document on information obtained from sources it believes to be reliable but which it has not independently veri
42、fied; HSBC makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of the Research Division of HSBC only and are subject to change without notice. HSBC and its affiliates and/or their officers, dir
43、ectors and employees may have positions in any securities mentioned in this document (or in any related investment) and may from time to time add to or dispose of any such securities (or investment). HSBC and its affiliates may act as market maker or have assumed an underwriting commitment in the se
44、curities of companies discussed in this document (or in related investments), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies and may also be represented in the sup
45、ervisory board or any other committee of those companies. The information and opinions contained within the research reports are based upon publicly available information and rates of taxation applicable at the time of publication which are subject to change from time to time. Past performance is no
46、t necessarily a guide to future performance. The value of any investment or income may go down as well as up and you may not get back the full amount invested. Where an investment is denominated in a currency other than the local currency of the recipient of the research report, changes in the excha
47、nge rates may have an adverse effect on the value, price or income of that investment. In case of investments for which there is no recognised market it may be difficult for investors to sell their investments or to obtain reliable information about its value or the extent of the risk to which it is
48、 exposed. HSBC Securities (USA) Inc. accepts responsibility for the content of this research report prepared by its non-US foreign affiliate. All U.S. persons receiving and/or accessing this report and wishing to effect transactions in any security discussed herein should do so with HSBC Securities
49、(USA) Inc. in the United States and not with its non-US foreign affiliate, the issuer of this report. In the UK this report may only be distributed to persons of a kind described in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001. The protections afforded by the UK regulatory regime are available only to those dealing with a representative of HSBC Bank plc in the UK. In Singapore, this publication is distributed by The Hongkong and Shanghai Bankin