Company Analysis

Crompton greaves Ltd. vs. Cummins India Ltd.

Efforts by :
Aditya Gl (02)
Jaydatt Gajjar(22)
1. Financial Analysis
Sr. No. Criteria Crompton Greaves Cummins India ltd Remarks
Ltd
1 Sales Growth 119% 16% Sales for CGL is
considered for 2 years,
and 5 years for Cummins

2 Profitability 7.31 14.46

3 Tax Payout= 32% 22%
Tax/PBT
4 Interest 6.57 49.385 Cummins hold higher
Coverage=PBIT/Int ability to pay interest
erest
Crompton carry high
5 D/E 1.69 0.03
leverage and hence risky.
6 Current Ratio 0.51 4.05 Cummins has higher
ability to pay short term
and long term obligations
2. Valuation Analysis

Parameter Crompton greeves Cummins India Remarks

P/E Ratio 58.89 36.16 P/E should be lower
Earnings 4.64/280.15=0.0162 or 25/931.35=0.0268 or Inverse of P/E ratio.
Yield=EPS/Current share 1.62% 2.68% Should be as high as
price possible.
Price to sales Ratio 280.15/((4091x10^7)/626 931.5/((5457x10^7)/2772 Crompton Greaves would
746142)=4.31, meaning 00000)=4.75, meaning attract more investments.
investor would be paying investor would be paying
Rs 4.31 for every Rs 1 of Rs 4.75 for every Rs 1 of
sales sales

Dividend yield 0.00 0.58% of current share

price.
3.Business and Industry Analysis
Sno Parameter Crompton greeves Cummins Remarks
1 Sales growth 119.15% 16% Sales growth for
Crompton jumped
suddenly in 2016-17
with new
investments of Rs
320 Cr.
2 Increase in production capacity and
sales volume
3 cPAT Rs.395.88 Cr Rs.2785.19 Cr Here PAT>CFO for
Cummins, Its are
cCFO Rs.486.16 Cr Rs.2546.06 Cr fictitious or the
sales money is not
realized.
4 Conversion of sales growth into 119% of sales 22% of sales growth
profits growth to 176 % of to 16 % of profit.
profit
 4.Management Analysis
A) Objective Parameters:

Sno Parameters Crompton Greaves Cummins India Remarks

1 Salary of promoters vs. Net profits Rs.25 Cr vs. Rs.290.6 Cr in 2016-17 and Rs.9.78Cr vs. Promoters salary for Cummins
Rs.12.74Cr vs. Rs.105.19 Cr in 2015-16 Rs.655.17 and Rs. 1.58 India Ltd grow at higher rate
Cr vs. Rs. 628.38 Cr with small increase in profit.

2 Dividend payments 0 Payments of Rs 13 per Stable dividend growths for

share in 2013-14 till Cummins India Ltd.
2014-15 . Payments
have increased to Rs
14 per share 2015-16
to 2017-18.

3 Promoters shareholding 34% 51% Higher control of promoters

4 FII shareholding 35% 15% In case of Crompton greaves
the FII is greater than that of
promoter.
 5. Other Business Parameters
Parameter
Product Diversification
Margin of safety in purchase price
.Earnings yield > 10 year Gsec yield
FCF/OCF
Credit rating
Crompton Greaves
Design, manufacturing, and
marketing of products related to
power generation, transmission, and
distribution.
EY=58.69; Gsec for 10 years =7.32
50.588 /310.45=0.16
AA- by Indian rating and research.
Cummins India Ltd
It is into design , manufacturing of
power equipment's. Diversified into
Power distribution business in 1967.
EY=36.16; Gsec for 10 years=7.32
10851.5/748=14.5
AA by crisil.
Remarks
Related diversification of Cummins
India ltd but cromptons greaves
(subsidiary of avantha group)
remained in manufacturing.
EY is higher in both cases.
The cash flows for Crompton
Greaves includes only 3 years, where
as for Cummins India Ltd 5 years
cash flows are considered. WACC
while calculating FCF is assumed to
be 10 %.
Better the credit rating , higher the
ability of making financial
commitments.
Thank You