Hold Craftsman Automation; target of Rs 5,012: ICICI Securities

ICICI Securitie's research report on Craftsman Automation

Powertrain segment revenue increased 7% QoQ in Q1, but margin continued to be subdued, driven by weaker CV/tractor/OHT off-take and mix, continuity of refurbishment-related activities. In terms of outlook of this segment, management sees muted growth in the near term led by weakness in CV/tractor; however, it expects strong growth from FY27 led by non-auto business ramping up and increased outsourcing opportunities from Europe/US. Mix of CV and tractor in overall revenue stood at 25%.

Outlook

Craftsman Automation (CFTM)’s Q1FY25 EBITDA came in at INR 2bn, down 5% QoQ (vs consensus estimate of INR 2.2bn). Aluminium segment EBITM at 13% was 180bps lower QoQ due to rise in commodity prices, and PT segment margin was impacted by: i) Seasonality leading to weaker mix, ii) continuity of machinery refurbishmentrelated activities. We are downgrading CFTM to HOLD from Buy with DCF-based revised TP of INR 5,012 (from INR 5,085), implying 26x FY26E EPS. Rating downgrade is due to i) recent run-up in stock price (15% in last 3 months), ii) recent equity dilution, whereby, funds are yet to be deployed and iii) continuity of weak performance in PT segment.