CUMMINSIND

Surges on Data Centre Boost, Margin Gains, and Domestic Demand Strength

posted a strong Q2FY26 performance, driven by a large data centre order and margin expansion. While domestic demand remains robust, export softness and rich valuations could pose near-term challenges. - Q2FY26 Highlights: Standalone revenue rose 27% YoY to ₹3,170 crore, beating estimates. Operating margin expanded 261 bps to 21.9%, marking the fifth consecutive quarter of margin improvement, aided by volume leverage and cost control. - Segmental Trends: Power generation led growth, boosted by a large data centre order. Distribution and exports also performed well, with export revenue up 24% YoY. However, industrial segment was impacted by weak construction and mining activity. - Export & Competitive Pressures: Management flagged near-term softness in export orders and rising competition in the data centre segment from global and Chinese players. Cummins is expanding capacity to reduce lead times and refocusing on domestic opportunities. - Regulatory Impact & Outlook: CPCB IV+ norms for diesel generators (effective July 2023) have stabilized pricing. Engine sales recovered to pre-regulation levels, but lumpy order inflows remain a risk. Power generation sales are expected to moderate in H2FY26. The stock surged 58% over six months, hitting ₹4,495. While Q2 results prompted earnings upgrades, IDBI Capital notes that at 40x FY27 earnings, valuations have caught up with growth potential, leaving limited room for disappointment.