Craftsman Automation still a good buy? Brokerage houses predict 40.87% upside, price target of Rs.3055

Craftsman Automation, founded in 1986 in Coimbatore, has become one of the leading names in precision manufacturing in various fields and engineering organization.

It is expected that the demand and sales of medium and heavy commercial vehicles along with two-wheeler will increase in FY22 as there is an upward trend seen in the economic activity as well as easing of lock-down rules and this would in-turn lead to a strong economic growth. The M& HCV are estimated to show a turn for the better in FY23. Even though the scarcity of semiconductors still pose a problem and creates challenges for the passenger car productions, the slack will be taken up by growth in the other areas mentioned. Analysts expect a growth of 17% in FY22 and 24% in FY23.

Key points in Q2 report:

1. The Stellantis order won by Craftsman worth Rs.2 billion will begin at the end of FY23.

2. The company also won a first of its kind order for tractor transmissions.

3. A decision to replace machines has been made which will help in n increasing productivity and efficiency.

The Net Income of the company saw a drastic increase from Rs.367 million in FY20 to Rs.968 million in FY21. According to analysts, this uptrend is going to continue and estimated Net Income of Rs.1575 million has been estimated for FY22.

The amount of profits are also estimated to increase given the investment in newer machines which will lead to higher and more efficient productivity, and also duet to the better storage solutions implemented by the company.

A revenue growth of 54.03% was reported in the second quarter of FY22 and the revenue was 31.21% higher than the June quarter of FY22. The highest revenues were recorded in the Automotive Powertrain vertical, standing at Rs.292 crore. The PAT also rose by 118.83% YoY compared to the quarter ended September 2020.

The Earnings per share value of the company stood at Rs.23.65 as compared to Rs.11.35 in the same quarter of FY21 and RS.11.39 in the previous quarter of FY22, leading to a 107.64% QoQ uptrend. The inventory days have shown an increasing trend since FY19 and a further increase is expected by 11.67%. A higher inventory days value shows how that the company is not able to turn their inventory into sales at the rate at which it was before. This can be attributed to the pandemic and shortage of supplies currently.

Mutual funds in totality have increased their holdings from 7.64% to 8.24% in Q2 of FY22 and so have the FII and FPI.

A 74% growth in earnings as well as a 20% Revenue CAGR for FY21-23 has been predicted by analysts.

A BUY call has been given for the share of this company by many brokerage firms with the price target set at Rs.3055.