Why Cummins India Share Price is Rising

Midcap stocks have long been attractive for their high return potential. The BSE Midcap index has outperformed the benchmark BSE Sensex index for the fifth straight month in August, rising 1.9% against a 0.5% gain in the Sensex.

In 2024 so far, the midcap index has jumped over 31% versus a 13% rise in the Sensex.

This is as midcaps as the perfect middle ground-not too hot, not too cold, but just right. Midcaps offer an ideal balance between stability and growth.

While largecap stocks are well-established with limited room for explosive growth, and small-caps are high-risk but potentially high-reward, midcaps strike the perfect balance.

This gives them greater growth potential with relatively lower risk.

In this midcap rally, Cummins India shares have zoomed over 95% in 2024 so far.

Here's why...

#1 Naval Pumps MoU

On 22 August 2024, Marine Electricals signed a memorandum of understanding (MoU) with Cummins India to produce pumps for Marine Navy ships.

This partnership will enable both companies to supply, commission, and provide after-sales services exclusively for the Indian Navy, as well as for private ship owners, according to Marine Electrical.

Additionally, the MoU will explore opportunities in the energy sector by offering power generation solutions.

Marine Electrical's subsidiary, Narhari Engineering Works, is currently expanding its manufacturing capacity for naval and marine motors up to a 1 MW range. The subsidiary is also set to begin manufacturing alternators for naval and marine applications at a new facility in Palghar.

Narhari Engineering has specialised in custom-made, shock-graded motors that meet Naval Engineering standards since 1964, producing motors suitable for installation on naval ships with ratings up to 300 kW.

Recently, the company expanded its presence internationally by opening offices in Europe and the UAE to focus more on export business. This MoU has positively impacted Cummin India's share price.

#2 Management Changes

On 13 August 2024, Cummins India announced the appointment of Shveta Arya as the new Managing Director, effective 1 September. Arya will succeed Ashwath Ram, who will continue to serve until 31 August.

Currently leading the power system business for Cummins India, Arya will maintain this role alongside her new responsibilities as Managing Director. She has been with Cummins India since 2016.

#3 First IT Global Competency Centre Launch

On 16 July 2024, Cummins India launched its first IT Global Competency Centre (GCC) in Pune, aiming to drive innovation across its global operations through specialised talent and technical capabilities.

The facility will host software engineers, product owners, architects, technology leads, and process experts to foster innovation in the automobile, engineering research and development (ER&D), manufacturing, and energy sectors.

The GCC is designed to leverage emerging digital technologies such as artificial intelligence, machine learning, and robotic process automation (RPA).

Aligned with the company's aspirations for business growth and India's ongoing progress, this GCC is a key component of Cummins' multi-year IT transformational strategy.

It will focus on enhancing operational efficiencies and accelerating the time-to-market for products and services.

Additionally, the GCC will offer internship programs for young talent and employment opportunities for veterans, individuals with special needs, women returning from maternity leave, and those re-entering the workforce. The centre will also collaborate with educational institutions.

#4 Robust Q1 Results

In the June 2024 quarter, Cummins India's revenue increased by 4%, reaching Rs 23.2 billion (bn).

Meanwhile, net profit surged by 31% year-on-year to Rs 4.6 bn. This growth was driven by strong domestic demand across all segments, particularly the industrial sector.

While the powergen revenue was slightly weaker due to the sunsetting of CPCB II norms on 30 June 2024, the company has fully transitioned to CPCB IV+ emission norms-compliant products as of 1 July 2024.

Cummins believes its robust portfolio of CPCB IV+ compliant products positions it well to meet customer demand across its entire product range. The company remains confident in its long-term growth prospects.

#5 Critical Components Manufacturer

Cummins India Ltd designs, manufactures, distributes, and services diesel and alternative fuel engines ranging from 2.8 to 95 litres, as well as diesel and alternative-fuelled power generator sets up to 3,000 kW (3,750 kVA), along with related components and technology.

As a leading provider of backup power solutions for the data centre industry, Cummins boasts the largest dedicated support network in the world.

The company supplies power generation systems across various segments, including infrastructure, IT/ITES, data centres, and healthcare.

As data centres transition towards carbon-neutral technology, Cummins' sustainable power solutions align with the nation's goals for a cleaner and more sustainable future.

The increasing demand for data centres positions Cummins as a primary beneficiary of this trend.

What Next?

Looking ahead, Cummins is dedicated to achieving net-zero emissions across its global operations by 2050. The company is heavily investing in the research and development of alternative fuels such as hydrogen, natural gas, and renewable fuels to significantly reduce carbon emissions.

Additionally, Cummins is leveraging data analytics to optimise its operations, identify emerging trends, and make informed strategic decisions.

The company is also focused on upskilling its workforce to meet future challenges and maintain its competitive edge.

With the Indian data centre market projected to grow from US$ 7.2 bn in 2023 to US$ 21.8 bn by 2032 - reflecting a strong CAGR of 13.4% during this period - Cummins, as a key component manufacturer for the sector, is well-positioned for significant growth.

How Shares of Cummins India have Performed Recently

Over the last one month, the share price of Cummins India has gained 4%. In 2024 so far, the stock is trading higher by 96%.

In the past one year, Cummin India's share price is up by 124%.

The company touched its 52-week high of Rs 4,171.9 on 25 June 2024 and its 52-week low of Rs 1,653 on 29 September 2023.

About Cummins India

Cummins India Ltd, a subsidiary of Cummins Inc. (USA), is a leading manufacturer and distributor of diesel and alternative fuel engines, power generator sets, and related components and technology.

Established in 1962, the company has grown to become a significant player in the Indian market, catering to a diverse range of industries including automotive, power generation, industrial, and marine.

Cummins India operates through various business segments, such as the engine business, power systems business, distribution business, and components business.

Cummins India also provides backup power solutions, particularly for the rapidly growing data centre industry, and boasts the largest dedicated support network in the world.

Cummins India is headquartered in Pune and operates several manufacturing facilities across the country, contributing significantly to India's industrial growth and sustainability goals.

For more details, see the Cummins India company fact sheet and quarterly results.

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