27 May , 2021 By : Kanchan Joshi
MUMBAI: Shares of Cummins India Ltd fell nearly 6% on the National Stock Exchange in opening deals on Thursday, reacting to the company's disappointing Q4FY21 earnings. It missed estimates on key earnings parameters of revenue growth and operating margins. Sales at Rs1,246 crore was 12?low consensus estimates on weaker exports. Exports at Rs255 crore and domestic sales at Rs976crore were also lower than estimates.
Ebitda margin at 13.4%, slipped 350 basis points (bps) sequentially and 120 bps below consensus estimates. Ebitda is short for earnings before interest tax depreciation and amortization. One basis point is one hundredeth of a percentage point.
As expected, gross margins contracted annually and sequentially to 32.3% on higher commodity prices. It should be noted that gross margins in Q4FY21 were at a multi-quarter low. "The miss on Ebitda margins is thus linked to the adverse impact of operating leverage due to lower than estimated sales," analysts at Nomura Inc said in a report on 27 May.
Even though the company's profit after tax met expectations, it was boosted by a record high growth of 24% year-on-year in other income.
Meanwhile, the company's management refrained from giving a guidance for FY22 due to near-term uncertainty given the second wave of Covid. However, it expects the Indian economy to recover from Q2FY22 end, which would translate into an improvement for the company.
"We expect 1QFY22F to be impacted by commodity price increase as well as impediments to shipping from India: The sharp rise in commodity prices in CY21 till date can lead to gross margin compression in 1QFY22," said the Nomura report.
The report added that due to rising covid cases in India, ships visiting from India to export destinations are often being quarantined for 14 days, leading to long logistics lead time and costs which may continue to impact exports in 1QFY22.
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