On Friday, Cummins (NYSE:CMI) India stock received an updated rating from Elara Securities India, with the firm raising its stance from "Reduce" to "Accumulate". The new price target set for the stock is INR3,965.00, a significant increase from the previous target of INR2,320.00. This adjustment comes as Elara Securities anticipates a robust earnings growth for the company.
The upgrade is attributed to a revised earnings per share (EPS) forecast, which has been increased by 17% for the fiscal year ending in 2025 (FY25E) and 16% for FY26E.
The optimism is largely due to the expected transition to the CPCB IV emission standards and the company's ability to expand margins through superior pricing strategies. Furthermore, Elara Securities has introduced projections for FY27E.
The financial firm expects Cummins India to achieve a compound annual growth rate (CAGR) of 15% in earnings from FY24 through FY27E. The projected return on equity (ROE) and return on capital employed (ROCE) for the company are both estimated at 26% during the period of FY25-27E. These figures reflect the company's potential for strong financial performance in the coming years.
Despite the positive outlook, Elara Securities also cautions investors about potential downside risks. These include a shift in government policy towards clean energy, which could reduce the demand for diesel generators, and the possibility of geopolitical issues affecting export demand.
The revised price target of INR3,965.00 is based on an increased price-to-earnings (P/E) ratio of 48x, up from the previous 35x, applied to the June 2026 estimated earnings. This new valuation reflects the firm's confidence in Cummins India's growth trajectory and profitability over the next few years.
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