Cummins Q4FY18 Concall Summary


Financials of Q4 FY2018

Cummins India Revenue Trend FY18.png
  • Net sales grew by 4% to 1206 Crores as compared to Q4 FY2017. Domestic sales declined by 5% to 816 crores while exports grew by 30% to 390 Crores.
  • Net sales dropped by 9% to 1296 crores as compared to 1318 Crores in the previous quarter. Domestic sales declined by 9% while exports declined by 7%
  • Profit before taxes grew by 7% to 209 crores as compared to 195 Crores recorded in Q4 FY2017. 
  • Profit before taxes declined by 5% to 209 crores as compared to 220 Crores recorded in the previous quarter.
  • For the FY2018, net sales were 4952 Crores which is almost equal to the last year’s 4958 Crores. Domestic sales at 3378 Crores improved by 1% while exports declined by 2%     
  • Net profits before tax at 852 crores excluding a one-time gain of 56 crores on sales of asset declined by 6% compared to 908 crores recorded in the previous year.
  • Power gen was at 330 crores, industrial was 197 crore and Distribution business was around 300 crores.
  • The domestic growth would have been 5% instead of 1% as compared to last year had the price reduction been normalized for GST 
  • Industrial segment registered 8% growth driven by rail and construction segment and distribution grew by 6%. Despite competitive pressure, power gen business remained flat.
  • Dividends were increased from 700 to 750% reflecting the confidence in future. 
  • The markets in which they are present in power gen business, they have grown their overall share by 1%.
Cummins Dometic vs Exports FY18.png


  • Exports breakup for this quarter: The low horsepower was around 70 crores. Mid was about 110 crores. Heavy duty was 25 crores, and high horsepower was 150 crores. Spare was about 30- 40 crores.
  • Domestic breakup for this quarter: Low horsepower was around 110 Crores; Power gen is 33 crores. Mid is 100 crores. Heavy duty is about 30 crores. High horsepower is 180 crores.
  • Industrial segment breakup - Compressors was about 35 crores. Construction was 80. Mining was about 25 crores. Rail was 50 crores (one of our best quarters). And then the others were about 10 crores.
  • Capex for the last year was about 200 crores which was used in putting up a new Conrod line and robotic line for exports. Another usage was in the phase 1 of tech centre of about 130 to 140 crores.
  • Some of their property has been leased out at 8% pre-tax rental income which at maturity stage would start to receive an income of almost 100 crores and provider buffer for other fluctuations. 
Cummins FY18 Domestic revenue.png
CUmmins FY18 Export revenue.png

Growth Prospect in FY19

  • Expecting a growth of 8% to 10% in domestic market while the export segment is expected to remain flat considering the current market situation
  • Industrial segment is expected to grow by 9% to 10% while the expectations in power gen segment is to grow by 7% to 8%
  • As the commodity prices are increasing they are looking for the introduction of new products to improve their margins which are under pressure for last few quarters.
  • They are hopeful of the recovery of global power gen market for exports and are ready to capitalize on demand improvement in both the HHP and LHP markets.
  • With the government’s push towards creating infrastructure, they are optimistic of the long-term state of the domestic economy will drive their sales. 
  • They are optimistic about the marine market. They have got the projects however lacking on the execution part as the government ship yards have significant backlogs and financial situation of ship yards is not very good. 
  • Power gen business did not see much growth because they could not fulfil an order by primary shipments from the engine plant which will be done by secondary shipments in this quarter. 
  • Infrastructure segment in power gen business is expanding. The order board in manufacturing segment is starting to get better which was not strong earlier. 
  • Rental business is seeing upward trend. Data centre, one of their main strengths wherein they have very strong market share will continue to expand in the coming year.
  • The export segment is very inconsistent overall in terms of regions. They see some positive gains from the African and Middle east markets.
  • They feel that they will do well as a company when the emission standard will become stringent and they have already started planning for those changes. 

Market Presence

  • They possess 100% share in water rig market and they grew by 8% even though it came down to almost half in size in the preceding year.
  • They have the market share of around 65% to 66% in high horsepower market size of 2500 units in power gen business which is 3% to 4% higher than the previous year.
  • All the industrial market engines are manufactured by Cummins internally except a 6-litre engine which they source from Tata Cummins.
  • They don’t cater to high horsepower products in oil and gas and mining. They just cater to high horsepower gen segment. 
  • They are very dominant in the bigger construction side like DLF or bigger apartments where 500, 750 KVA gensets are required. 
  • Almost 70% of the 20-tonne excavators used for road construction are powered by Cummins.

Future Strategies

  • FY2019-20 is going to be the peak of Capex cycle with spending of about 350-400 Crores on Kothrud high horsepower tech cells and its upgradation. After that there will be a sharp decline in the Capex.
  • For the projects business, they have started the completion of the plant in Pirangut where they used to make some small gensets, etc and revamping it to cater to industrial requirement for some value-added systems.
  • The market is price sensitive and some new players are coming in. They are aggressively working on ‘’Accelerated Cost Efficiency Programme’’ to make sure that their cost structure across the direct material, manufacturing overheads etc get aligned. 
  • They are focusing to continue to maintain and expand shares in the segments they play strongly and working on launching products which have better margins. 
  • They are launching various products in the industrial space and power gen segment.
  • They are expanding their distribution centres in Phaltan as their parts business continues to grow.
  • They adjust for the exchange rate at which they export for Cummins Inc within the quarter. 
  • There were some issues in the collections from Cummins overseas entities.