Cummins India shares are likely to remain in focus after brokerage Nomura downgraded the stock to ‘Neutral’ from ‘Buy’, saying much of the positive outlook is already reflected in valuations following a sharp rally in the stock over the past year.
While lowering its rating, the brokerage raised its target price to ₹6,000 from ₹4,780 earlier. However, with the stock having closed at ₹6,028 on May 27, 2026, Nomura sees a marginal implied downside of around 0.5%.
The brokerage’s latest note came after Cummins India reported a stronger-than-expected quarterly performance. Revenue rose 23% year-on-year, beating both Nomura and consensus estimates. EBITDA also exceeded expectations, aided by operating leverage despite pressure on gross margins. Recurring profit after tax came in at ₹6.4 billion, ahead of both brokerage and street estimates.
According to Nomura, domestic demand drivers remain intact, particularly in the Powergen business where structural growth trends continue to support demand. The brokerage expects the Powergen segment to deliver a CAGR of around 20% between FY25 and FY29, driven by data centre expansion, digital infrastructure investments and rising demand for high-horsepower generator sets.
The brokerage also remains positive on the distribution business, expecting sustained growth from higher aftermarket revenue, parts and service demand, deeper market penetration and product offerings targeted at price-sensitive customers.
Despite the healthy demand environment, Nomura highlighted near-term margin pressures as a key concern. It noted that pig iron and copper, which together account for nearly 75% of material costs, have seen prices rise significantly in the current fiscal year. While Cummins India has reportedly implemented price hikes, the brokerage believes these may not be sufficient to fully offset raw material inflation, potentially resulting in gross margin pressure in FY27.
Nomura said any meaningful recovery in margins would likely depend on commodity prices moderating, further pricing actions and a more favourable product mix over the coming quarters.
The brokerage has trimmed its FY27 earnings per share estimate by 2% to account for these short-term margin headwinds while introducing FY29 forecasts. It expects Cummins India to deliver a profit after tax CAGR of around 18% between FY26 and FY29.
“Post a 104% rally in its stock price, Cummins India currently trades at 52x FY28 earnings, implying limited room for further upside,” the brokerage said while justifying its downgrade.
Meanwhile, Cummins India shares ended the previous trading session at ₹6,028, having rallied more than 100% over the past year. The stock remains one of the strongest performers in the capital goods and industrial equipment space, supported by robust domestic demand and continued investments in power infrastructure.
Disclaimer: The views and recommendations are those of Nomura and do not represent the views of the publication. This article is for informational purposes only and should not be construed as investment advice.