Buy Craftsman Automation; target of Rs 5338: LKP Research

LKP Research's research report on Craftsman Automation

Craftsman Automation Ltd (CAL)’s Q1 FY24 numbers were in line with our expectations. Standalone revenues grew by 12% yoy and declined by 3.8% qoq to ₹7.56bn mainly on growth seen in Power Train and Aluminium Products segments. Power train business expanded 10% yoy riding on PV resilience. The segmental EBIT margins were reported at 21.9% v/s 27.4% yoy and 23.6% qoq. Automotive Aluminum products business revenues witnessed a sharp rise of 21% yoy and 5% qoq to ₹2.07bn as the segment encountered decent 2W demand. At EBIT levels the margins which are off late in double digit continued to do so by coming at 12.6%, up from 11.4% qoq and 11.9% yoy. In the Industrial Engineering segment, revenues showed a muted growth to ₹1.66bn as the storage business was seasonally weak. Overall EBITDA margins came in at 21.6%, up 30 bps qoq. PAT de-grew by 23% qoq and 4% yoy at ₹541mn in a seasonally weak quarter.

Outlook

We estimate the consolidated revenues/EBITDA/PAT to grow at a CAGR of 32%/33%/43% in the period between FY23-25E. We therefore value CAL at 22x FY 25E earnings as it currently trades at 19x. Maintain BUY with a target of ₹5,338.

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