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Intense focus on promoting diversity in business

Making inroads in the EV segment | Healthy order wins across businesses

CRAFTSMAN AUTOMATION (CRATFSMA)’s FY23 annual report highlights its initiatives to promote diversity in its business and reduce dependence on certain segments, which have started to reflect in further revenue diversification. The recent acquisition of DR Axion (DRA) has substantially enhanced the salience of PVs (to 30% from 7%) and reduced dependence on CVs (to 22% from 29%). More importantly, this has been achieved despite growing and winning orders in legacy businesses of CV powertrain. Further, CRAFTSMA started making inroads in the EV segment in both powertrain as well as aluminum divisions in FY23. With most of the order wins having started production (SoP) in late-FY23 or in FY24, the sustenance of growth visibility is high. We marginally raise our earnings estimates by ~1%/3% for FY24/25 to factor in the ramp-up in aluminum business. We also increase our target multiple to 20x from 18x to factor in the continued strong growth momentum as well as capital efficiencies. Reiterate BUY with a TP of INR4,750 (based on 20x Jun'25E consolidated EPS).

Prime focus on promoting diversity in business model

* CRAFTSMA’s focus on diversity has continued to evolve as a key organizational priority. It is constantly seeking opportunities to widen its sectoral footprint. The company is retooling its operations and processes to embed diversity within each of its businesses. It has entrenched diversity as a goal within business verticals and team objectives as well as performance reviews, with a meaningful accountability for driving change.

* In Powertrain business, it strengthened its presence in the farm, offhighway equipment and PVs to reduce its dependence on CVs. Further, it made inroads into the nascent electric CV segment.

* The recent acquisition of DR Axion (DRA) has helped the company diversify its aluminum business in favor of the PV segment.

* In Storage Solutions business, it de-risked its strong presence in the ecommerce space by expanding into new sectors such as cold storage, multi-commodity storage, record management and the private sector

Making inroads in the EV segment

* In Powertrain business, CRAFTSMA widened its footprint in the electric CV segment with two engagement wins through its foundry partner.

* In the Aluminum business, it received an order from a global OEM to machine bracket housing for a pick-up truck.

* In the Aluminum business, it received an order from a global OEM to machine an e-axle housing for an EV.

* In the Aluminum business, it won business engagements with two domestic e-2W manufacturers. The parts have been developed and approved and commercial production is scheduled post-FY24.

Auto Powertrain – Diversification beyond CVs through new orders…

* To reduce its dependence on the CV sector, the company is actively engaging with players in other automotive segments, namely tractors, construction equipment, and PVs. It has been successful in securing order wins from all three segments.

* In tractors, the company further gained traction due to: a) engagement with a tier-1 supplier of a global OEM for three engine programs (SoP during endFY23), b) development of (casting and machining) the engine head, block, and bed plate for compliance with new emission norms for a leading domestic tractor OEM (validation ongoing), and c) increase in content led by the TREM4/5 norms.

* In the off-highway segment, it received: a) a sizeable order from a leading global player for machining the cylinder block & head, as well as for machining the fully-finished crankcases for an industrial engine that was being imported into India earlier (SoP in FY24), and b) an order for machining the cylinder block of an air-cooled engine for industrial application for a prominent Indian player.

* In PVs, the company has won orders for: a) fully-machined cylinder blocks for a domestic OEM for its SUV model, b) machined engine components for a European PV OEM in India, and c) machining and localizing the previously imported engine block for a global PV player operating in India (SoP in FY24).

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