Prabhudas Lilladher has kept a 'Buy' rating on Cummins India with a target price of Rs 5,334. This comes after the company's Q2 FY2027 results showed a 27% drop in profit, causing a recent decline in its share price. While profitability faces pressure from rising costs, the brokerage highlights resilient demand in the data center and real estate sectors as key growth drivers.
Brokerage firm Prabhudas Lilladher has reaffirmed its 'Buy' rating on Cummins India, setting a target price of Rs 5,334. The update follows the company’s recent Q2 FY2027 financial performance, which was released on November 4, 2026. The results led to a sharp decline in the stock price as investors reacted to profitability figures that fell short of market expectations.
While the company recorded a 4% year-on-year increase in revenue, reaching Rs 3,247 crore, the bottom line told a different story. Profit after tax fell by approximately 27% to Rs 467 crore compared to the same period last year. A major factor behind this decline was the squeeze on profit margins. The EBITDA margin, which measures core operational profitability, contracted by 658 basis points to 15.36%.
Management and analysts have pointed to a combination of factors for this margin pressure, including elevated commodity prices, rising freight costs, and a product mix that was less favorable than in previous quarters. These operational headwinds forced the brokerage to reduce its earnings per share estimates for the company for FY27 by 15%, with smaller downward revisions for the following two fiscal years.
Despite the short-term earnings miss and the resulting volatility in the stock, the brokerage remains optimistic about the company's long-term prospects. The core investment thesis rests on strong, sustained demand in critical infrastructure sectors. The company continues to see significant business from data centers and real estate, which serves as a foundation for its growth. Additionally, the distribution segment remains a stable contributor to revenue.
Investors looking at the company now face a mix of challenges and potential opportunities. On the risk side, the primary monitorables are persistent cost inflation and potential supply chain disruptions, which could continue to impact margins if not managed effectively. The speed at which the company can recover its profitability will depend on its ability to implement pricing actions—which it began in the second quarter—to offset higher input costs. The market will be watching upcoming quarterly reports closely to see if these pricing strategies and internal efficiency measures successfully stabilize margins and improve earnings growth in the coming quarters.