Craftsman Automation Q3 Results Review - Adding Gravity, Low Pressure Die Casting To Its Strength: Anand Rathi

Anand Rathi Report

During Q3 FY23, Craftsman Automation Ltd. acquired DR Axion India, which manufactures aluminium cylinder heads through gravity and low-pressure die castings (Craftsman primarily does high-pressure die castings) for passenger vehicles.

The cost of acquisition was Rs 3.75 billion for a ~76% stake. The consolidation is expected to be completed by March 2023. Post consolidation, the revenue mix for the auto aluminium segment would be ~60% passenger vehicles, ~40% two-wheelers and other segments from the current levels of ~80% two-wheelers and ~20% other segments.

We expect three types of synergies to play out in the near future-

1. operational synergies with respect to the casting process,

2. diversified customer mix (entry of PVs in the aluminium segment), and

3. supply of new products to existing customers and existing products to new customers.

Domestic demand remains robust for commercial vehicles while exports witnessed some demand contraction in Brazil, but management said this was a one-off and would return to normal in the next few months. Accordingly, we expect 10% growth in FY24 and 12% in FY25.

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