Craftsman Automation - DR Axion Good Asset At Reasonable Price: Motilal Oswal

Motilal Oswal Report

Craftsman Automation Ltd, has recently acquired 76% stake in DR Axion India Pvt Ltd. against cash consideration of Rs 3.75 billion. DR Axion India manufactures aluminium cylinder heads and blocks for passenger vehicle original equipment manufacturers.

The acquisition is complementary for Craftsman Automation as-

1. limited overlap w.r.t technology and customers,

2. increases share of PV segment, and

3. adds Korean OEMs viz Hyundai/Kia.

We expect this acquisition to be earnings per share accretive, resulting in upgrades in our FY24E/FY25E consolidated EPS by 14%/11% to factor in for consolidation of DR Axion India and associated acquisition debt.

We now estimate consol revenue/Ebitda/profit after tax to grow ~30%/28%/44% CAGR over FY23E-25E. However, we now lower our target price-equity multiple for Craftsman Automation to 18 times of FY25E EPS (versus 20 times earlier) as we now consolidate for DR Axion India.

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