Craftsman Automation, an engineering firm, has witnessed a remarkable increase in its share price by almost 101% over the past two years, surging from ₹1,435 apiece to the present level of ₹2,894.
However, according to the projections made by the analysts at Anand Rathi, the stock may still have long way to go. The brokerage has recognized that the recent acquisition of DR Axion India is a significant positive factor for Craftsman Automation.
Craftsman Automation acquired a 76% stake in DR Axion India for ₹375 crore. The company specializes in manufacturing aluminium cylinder blocks and cylinder heads for passenger vehicles using various casting processes. The company has a 100% share of business with KIA, Hyundai, and M&M for new-generation engines.
It operates from a single manufacturing plant with a peak capacity of 30,000-32,000 tons and estimated revenues of approximately ₹15 billion at peak. The company plans to leverage its technology and cater to the CV and farm equipment segments.
According to the brokerage, this acquisition will unlock multiple synergies for Craftsman Automation, such as strategic expansion in existing markets, a greater share of business from customers, new customer acquisitions, new market penetration, a broader high-pressure die-casting footprint, and greater business potential for electric mobility, all of which augur well for long-term growth.
The brokerage highlighted that the operational synergy would provide more business opportunities for Craftsman Automation to supply high-pressure die-casting products to KIA, Hyundai, and M&M.
Anand Rathi maintained its 'Buy' rating on Craftsman Automation with an unchanged target price of ₹3,891. It expects the company to achieve an 11% revenue CAGR over FY23–25 and 31% earnings growth, resulting in an EPS of Rs. 204.8.
Earlier, in February, brokerage firm Motilal Oswal initiated coverage on the stock with a "buy" tag and a target price of ₹3,925 apiece.
According to Motilal Oswal, the company has an exceptional history of organic growth and market leadership, which is not very common in the auto component industry.
The brokerage anticipates a CAGR of 13%, 17%, and 37% in standalone revenue, EBITDA, and PAT from FY23E–FY25E. The growth is expected to be driven by strong revenue traction, savings in input costs, and balance sheet deleveraging. They further predict that RoE will improve by 4.6pp to 22.3% by FY25E.
Craftsman Automation is a diversified engineering company with vertically integrated manufacturing capabilities. The company operates in three business segments: automotive powertrain, aluminium die casting, and industrial and engineering.
7 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.