Nomura downgrades Cummins India shares to Neutral despite raising target price by 25%. Here’s why

Japanese brokerage Nomura has downgraded Cummins India to “Neutral” from “Buy” and raised the target price to Rs 6,000 from Rs 4,780 earlier (25% increase), implying a limited downside from current market levels. Following the brokerage action, shares of the power generation company fell 2.7% to an intraday low of Rs 5,858 on Friday.

The brokerage said the stock is currently trading at 52x FY28 estimated earnings, which it believes leaves little room for further re-rating. The revised target price is based on a sum-of-the-parts valuation rolled forward to June 2028 earnings and implies a target P/E multiple of 49x, compared with 42x earlier, supported by strong prospects in the data centre segment.

Nomura highlighted near-term gross margin headwinds as commodity inflation is likely to outpace pricing actions. According to the brokerage, prices of pig iron and copper, which together account for nearly 75% of material costs, have risen 20% and 40% year-on-year, respectively, so far in Q1 FY27. Channel checks suggest the company has taken price hikes of around 8-10%, but Nomura believes these may not be sufficient to fully offset rising input costs.

As a result, the brokerage expects margin pressure to continue through the first half of FY27, with the possibility of further gross margin compression if commodity prices remain elevated. While cost controls and operating leverage could partly cushion the impact, Nomura said a meaningful recovery in margins would likely depend on moderation in commodity prices, additional selective price hikes and a favourable product mix, which may take a few quarters to materialise.

However, Nomura expects Cummins India’s Powergen segment to deliver a CAGR of 20% over FY25-29, supported by multiple structural growth drivers. The brokerage said the rapid expansion of data centres in India, led by rising investments from hyperscalers, is expected to create sustained demand for high-horsepower gensets, a segment where the company holds a dominant position.

The brokerage also expects the Distribution segment to clock a CAGR of 19% during FY25-29. According to Nomura, growth in this business is likely to be driven by the transition to CPCB IV+ emission norms, which is expected to increase aftermarket revenue per unit through higher demand for spare parts and services.
In addition, the brokerage believes expansion into underpenetrated geographies could support volume growth, while fit-to-market product offerings targeted at price-sensitive applications may help widen the company’s customer base further.

Cummins India Q4

For the quarter ended March 31, 2026, the company reported total sales of Rs 2,963 crore, marking a 23% increase compared to the same quarter last year, while remaining marginally lower by 1% on a sequential basis.
Domestic sales stood at Rs 2,513 crore during the quarter, rising 30% year-on-year, although they moderated by 1% compared to the previous quarter. Export sales came in at Rs 450 crore, down 6% from the year-ago period and 5% lower sequentially.

Profit after tax for the quarter stood at Rs 650 crore, while net profit margin came in at 21.9%.

Cummins India shares have risen 33% since the start of the year. Over the past year, the stock has risen 88%.

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