Arihant Capital IPO report on Craftsman Automation
Craftsman Automation Limited (“Craftsman”) Incorporated in 1986, Craftsman Automation Ltd is a leading engineering organization that is engaged in manufacturing precision components. The company designs, develops, and manufactures a range of engineering products. It is one of the leading players in the machining of cylinder blocks for the tractor segment. The business operates 3 key segments namely Automotive-Powertrain and others, Automotive-Aluminium Products, and Industrial and Engineering division that is engaged in manufacturing material handling equipment i.e. hoists, industrial gears, marine engines, crane kits, gearboxes, locomotive equipment, storage solutions, etc. The company owns 12 state-of-the-art manufacturing facilities across 7 cities of India. Its customer base includes Tata Motors, Daimler India, Tata Cummins, Mahindra & Mahindra, Royal Enfield, Siemens, Escorts, Ashok Leyland, VE Commercial Vehicles, TAFE Motors & Tractors, etc.Key Highlights.
Valuation and Outlook
We believe Craftsman has multiple lever going forward with Tractors/ MHCV industry ( both doing well) is in uptrend, capex cycle is almost over with benefits to be seen going forward, Strong margins despite lower revenues in FY20, likely debt reduction with improved free cash flow and diversified client base across segments. Valuations look higher on a trailing basis At the upper price band of INR 1490, issue has been offered at a PE of 73 (x) to its FY20 EPS of INR 20.41, but outlooks remain strong for long term. We recommend "subscribe" for a long term portfolio.
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