Shares of Craftsman Automation, an engineering company, rose sharply on Friday after the company entered into a definitive agreement to acquire a 76 percent stake in DR Axion India Pvt. Ltd. for ₹375 crore.
Upon completion of the transaction, DR Axion India will be a subsidiary of the company. The acquisition will help both entities leverage their strengths and build better synergies, the company said.
The stock opened higher at ₹3,349.95 apiece in Friday's trade compared to the previous closing price of ₹3,258.80 on the BSE. It further rose to hit an all-time high of ₹3,710.95, up 13.87 percent, marking the largest intraday gain since its listing on March 25, 2021.
At 2:00 p.m., the stock was trading at around ₹3,596.90, up by 10.35 percent, on the BSE.
YTD, the stock has risen from ₹2,260 apiece to its current position of ₹3,596.90, up 59.15 percent.
At the prevailing price, the stock traded at a price-to-earnings (P/E) multiple of 36.37(x), which is much lower than the industry P/E of 42.64 (x).
Craftsman Automation is engaged in the business of manufacturing engineering components, sub-assemblies, and products and rendering contract manufacturing services to various industries.
ICICI Securities in a recent note pointed out that the company has a well-diversified portfolio and is confident of delivering 20 percent revenue CAGR in the next 5 years, irrespective of the domestic CV cycle situation, as the revenue outlook is strong from new orders in segments like industrial and export CV engine, aluminium casting/machining for PVs, and strong outlook in storage solutions space.
CAL is benefiting from such new projects from Daimler, Volvo, Caterpillar, Stellantis, Detroit Diesel, Yanmar, and others, and growing ahead of markets, according to the brokerage.
“We believe that with M&M increasing the capacity of the Scorpio N and XUV700 by 12k p.m. beginning in FY24, CAL will benefit from the increased demand. Also, with a paucity of supplies of CI castings ahead, CAL is prepared to invest in the space in order to grow its machining business. Thus, for every ₹3 billion invested, CAL will earn ₹5 billion in CI casting revenue and ₹2 billion in machining revenue,” said ICICI Securities.
With 60–65 percent of overall gross profit coming from the CI auto power train segment, PV-related aluminium casting and industrial solutions are the next important things in the portfolio, the brokerage stated.
CAL is looking forward to benefiting from PV light-weighting LED component requirements ahead as demand for EVs intensifies. Also, being the second-largest storage solutions player (30 percent market share), CAL is catering to industrial warehousing solutions and adding diversity to its automotive parts portfolio, it added.
On the fundamental side, the company reported strong numbers for the September quarter by delivering a 25 percent YoY rise in its consolidated net profit to ₹62.5 crore from ₹50 crore in Q2 FY22.
The revenue from operations jumped 36.10 percent to ₹778 crore during the quarter as compared to ₹571.6 crore in the year-ago quarter.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
