2:5 Bonus, 5:1 Split, Upcoming Dividend Rs 20/Sh: LargeCap Oil Stock Advised To BUY, Target Rs 4,001

Cummins India is a not PSU, but a large oil and gas stock that is scheduled to pay a final dividend of Rs 20 per share. The record date is fixed for July. And ahead of the dividend, brokerage BP Wealth has recommended BUY in Cummins share price in June 2024. The target price is set at Rs 4,001.

On BSE, the share price stood a Rs 3830.40 apiece with a market cap of Rs 1,06,178.69 crore. The stock is near its 52-week high of Rs 3,899.95 apiece, and more than doubled from its 52-week low of Rs 1,590.30 apiece. With a Return on Equity of 26.94%, the stock has surged by a whopping 95.5% on BSE.

Ahead, Cummins is scheduled to pay a dividend of Rs 20 per share for FY24. The record date is fixed on July 19, 2024, which will also be its ex-dividend date. This will be the second dividend payout in 2024 by Cummins, also will be in addition to the Rs 18 per share interim dividend for FY24. Together, Cummins will pay up to Rs 38 per share dividend in FY24.

As per Trendlyne data, the company has delivered up to 47 dividends since July 2001. Furthermore, Cummins has a track record of bonus issues in the ratio of 2:5 in September 2011 and a stock split of 5:1 in November 2000.

Technical Analysis:

Giving a technical view, BP's note said that the stock displays a strong uptrend. The price action ascended 135% followed by a 20% correction as profit-taking bouts. Also, the stock witnessed a relatively stronger pullback from the support of 50 daily MA. The average line also offers immediate support. Meanwhile, the price action is trading in a potential cup and handle pattern indicating signs of trend continuation.

Fundamental Analysis Of Cummins India:

On the valuation, BP's note said, "We recommend to BUY CUMMINS between CMP-3680 for the target of 4001 with a stop loss of 3520 in the short term."

BP highlighted the investment rationale for selecting Cummins India as its top pick in June 2024. The rationales are:

- While the industry transitions to new regulations, Cummins is prepared to anticipate a shift towards CPCB IV+ compliant products post-June 30, 2024. With the anticipation of the shift and strong sector tailwinds, the management is poised to target a growth rate twice the GDP and expects aggressive growth in FY24/25E, driven by robust domestic demand across various sectors. While exports may have reached a low point majorly due to geopolitical tension, export rebound is expected in FY25 with the global introduction of CPCB 4+ products.

- Amidst the challenges posed by the COVID-19 pandemic, the company responded by implementing efficiency measures and cost controls to protect margins during the downturn. These actions are anticipated to lead to margin improvement as pressures from raw material prices ease. In FY24, the adjusted EBITDA margin stood at 19%, considering a one-time benefit of Rs. 600 million. The gross margin was recorded at 35.5% and is projected to remain steady at 35%. Furthermore, price adjustments due to new emission standards are expected to contribute to margin enhancement.

Formed in 1962, as the largest entity of Cummins in India, Cummins India Limited is the country's leading manufacturer of diesel and natural gas engines.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.