- In the realm of stock investing, the trajectory of shares is far from linear, as various factors ranging from global economic shifts to domestic policy changes and regulatory updates can swiftly influence stock prices.
- Even the most promising stocks are not immune to fluctuations, potentially leading to periods of decline followed by the possibility of sustaining such trends in the ensuing months.
- Despite fluctuations in the market, the shares of Cummins India, one of the leading power solution providers, have consistently exhibited a robust upward trajectory.
Discover the remarkable journey of Cummins India shares, which have surged over 270% in two years, and explore the factors driving this impressive growth.
Cummins India’s Impressive Stock Performance
Out of the last 24 months, Cummins India stock has only recorded losses in five, and those losses were minor. During this period, the shares have grown from ₹1,030 apiece to the current market price of ₹3,834 apiece, resulting in massive gains of 272%. In the current year so far, the stock jumped 95.25%, the largest yearly gain since 2009.
Factors Driving Growth
Additionally, the stock is trading 1270% higher compared to its 2020 low of ₹280 per share. On May 18, it reached a new all-time high of ₹3,895 per share. Cummins India is a leading manufacturer of diesel and natural gas engines. The company is engaged in the business of manufacturing, trading, and selling engines and allied activities. It presently operates in three business segments: engines, power systems, and distribution.
Demand Across Segments
The demand across all segments continues to show strength. Specifically, the power generation segment is receiving support from data centers, commercial real estate, residential real estate, infrastructure, and manufacturing sectors. Analysts anticipate that these demand drivers will persist as there has been an increase in data center capacity, as well as in the launch of residential and commercial projects over the past three years.
Government and Private Sector Influence
In the industrial segment, demand is bolstered by the government’s ongoing focus on infrastructure development. Additionally, in the distribution segment, increased service offerings, enhanced penetration across different cities and segments, and reconditioning offerings are contributing to demand growth, according to analysts. The company sold 3,000 CPCB IV+ gensets during 3QFY24 in regions where stringent emission norms are in place. With the implementation of CPCB IV+ norms in July 2024, analysts expect a better price recovery for CPCB IV+ products.
Analyst Optimism
In mid-April, Japanese brokerage firm Nomura expressed optimism regarding India’s capital goods companies, projecting that they would sustain their positive earnings momentum. Nomura cited the confluence of government and private capital expenditures as a key factor contributing to this outlook. According to Nomura, private investment is on the rise, with momentum building, and this uptick is further supported by a surge in the business assessment index, indicative of improved demand conditions.
Financial Performance
For the quarter ending in December, the company reported strong financial results, surpassing analysts’ estimates. The profit after tax (PAT) surged 26% year-on-year to ₹455 crore. Revenue from operations for the quarter reached ₹2,502 crore, marking a 17% increase compared to the same quarter last year and a 34% rise compared to the previous quarter.
Conclusion
Cummins India’s stock performance over the past two years has been nothing short of remarkable, driven by strong demand across its business segments and positive market conditions. With continued support from both government and private sector investments, the company is well-positioned for sustained growth. Investors should keep an eye on Cummins India as it navigates the evolving market landscape.
