Craftsman Automation - Diversified, High RoCE Ancillary Player: ICICI Securities

ICICI Securities Report

We recently interacted with Craftsman Automation Ltd.’s management to understand its business strategy and outlook. Following are the key takeaways:

1. well-diversified business catering to domestic/export passenger vehicles, commercial vehicles, two-wheelers along with industrial components and storage solutions. Portfolio includes cast iron powertrain component machining, aluminum casting/machining, hoists, special purpose machines etc.;

2. though compression ignition powertrain is the key segment contributing ~65% of overall gross profit, aluminum casting/machining is the emerging business opportunity catering to vehicle light weighting and electric vehicles;

3. domestic two-wheeler powertrain/transmission business related aluminum parts subject to EV risk are ~5% of revenue. Craftsman Automation expects this loss to get compensated by new aluminum component projects under PV segment;

4. looking at the paucity of CI casting supply in India in coming years, Craftsman Automation is envisaging investing organically or inorganically in the space to grow its machining business;

5. ~30% market share in the industrial storage solutions space with annualised revenue of Rs 4 billion and is expected to grow at ~20% plus compound annual growth rate in coming years;

6. targeting ~25% return on capital employed post taking in consideration capex of Rs 3-3.5 billion in FY23-FY24E.

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