Anand Rathi Share
Crafts Automation (Buy)
Target: ₹2,655
CMP: ₹2,030
Dominance in machining critical power train components, versatility in aluminium die-casting along with growth augurs well for Craftsman Automation in posting strong growth for the next 2-3 years. Also, growth being a function of capital formation in the country, Craftsman’s industrial and engineering division is expected to grow strongly, driven by the expected increase in capex.
Craftsman’s dominance in machining core engine components for M&HCVs, growth opportunities in aluminium die-casting verticals and its growing industrials business augurs well for its strong revenue and operational growth in the next 2-3 years.
On the expected strong M&HCV growth, orders in aluminium casting and capex growth at the country level, we expect it to post a 19 per cent revenue CAGR over FY21-23 to₹2,200 crore. Profitability expansion and de-levering underway. On the backdrop of the strong revenue growth across verticals, we expect its EBITDA margin to expand to 29 per cent by FY23.
Also, we expect earnings growth to be more than EBITDA growth due to subdued capex, reduced debt and the company moving to the lower tax regime in FY23. On the expected 19 per cent revenue CAGR over FY21-23, we expect 21 per cent EBITDA growth and a 70 per cent CAGR in earnings to ₹280 crore, leading to an EPS of ₹132.7.