Cummins India (KKC IN) – Q4FY26 Result Update – Strong domestic demand aided by data center – Downgrade to ‘REDUCE’

We revised our EPS estimates by +8%/10.4% for FY27E/FY28E factoring in healthy domestic powergen demand, increasing contribution from data centers and distribution business, and sustained margin resilience. Cummins India (KKC) reported a strong quarter, with revenue growing 22.6% YoY to Rs30.1bn driven by robust demand across domestic power generation and distribution businesses with EBITDA margin remained broadly stable at 21.3% (+17bps YoY) supported by operating leverage and favourable business mix. Data centres continue to be a key growth driver, contributing ~30–35% of domestic power generation revenue, with enquiry momentum from both hyperscalers and co-location players. Importantly, power generation (ex-data centre) demand also remained healthy, supported by manufacturing, solar cell facilities, pharma, commercial real estate, luxury housing and quick-commerce infrastructure, reflecting broad-based strength across end markets. Management highlighted healthy order momentum in railways and mining, while the distribution business continues to benefit from a growing installed base, increasing penetration of CPCB IV+ service offerings and predictive maintenance solutions. While exports demand particularly in Europe and Asia-Pacific markets, expected to remain moderate however outlook remain healthy driven by rising data-centre investments, healthy domestic industrial demand and continued focus on localization, manufacturing modernization and service-led growth. The stock is currently trading at a P/E of 59.7x/51.6x of FY27/28E. We roll forward to Mar’28E and downgrade our rating from ‘Hold’ to ‘Reduce’ given rally in stock price valuing the stock at a PE of 45x Mar’28E (43x Sep’27E earlier) with revised TP of Rs5,133 (Rs4,182 earlier).