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Craftsman (CAL) logged a robust 1Q, with consolidated revenue up 36% yoy (9% beat on our estimate). Consolidated EBITDA rose 45% yoy (8% beat, led by revenue beat). Fall in consolidated EBITDAM was restricted to 30bps qoq to 15.8% (20bps below our estimate). CAL highlighted that it is on a strong growth path, and the AP segment is expected to outpace PT/I&E, owing to strategic investments over the past few years. CAL is also on track to achieve $100mnpa revenue guidance by FY30 (FY28/FY29 to see 30/50% of this run-rate, having onboarded 6 large global customers; orders received from 4). The management indicated the tougher customer acquisition phase is behind for large-engine castings (incremental orders expected from customers, reducing time to market to 2Y vs 4Y earlier). Restructuring at Sunbeam is largely complete (90% by Dec-26); CAL is replacing 1-2 decade-old margin-decretive businesses (hence, utilization will not be hurt much). CAL guided for mid-teens EBITDAM at Sunbeam by 4Q (in line with parent AP margins). We believe CAL is entering a strong growth phase while monetizing forward-looking investments made to build new verticals (large-engine castings) and add new capabilities (SLS/DR Axion acquisition), while also diversifying revenue base, offering a strong rerating potential. We raise FY27-28E EPS by ~10%, primarily to factor in a strong growth outlook. We raise TP by ~14% to Rs11,900 (from Rs10,400; rolled forward), at 17x Jun-28E EV/EBITDA (vs 15x earlier); retain BUY.

Beat across all parameters; margins improving

Consol revenue rose 36% yoy to Rs24.3bn (9%/12% beat vs our/street estimates), led by 25/38/52% growth in PT/AP/I&E. Consol EBITDA came in at Rs3.8bn (8% beat vs our estimate), with EBITDAM narrowing by 30bps qoq to 15.8%. Consol PT/AP EBIT was down by 90bps/10bps qoq. Consol PAT was up 93% yoy at Rs1.5bn (ahead of our/street estimates, led by EBITA beat, higher other income, and lower depreciation).

Earnings call KTAs

1) CAL indicated it is on a sustained growth path. AP segment is expected to outpace others on both pace and absolute growth, led by multiple past investments that are yet to bear fruit. CAL noted the business is fairly balanced, with several order wins at various stages (some materializing in FY27; others still in development, to reflect in FY28/FY29).

2) PT: CAL is on track to hit $100mnpa large-engine castings revenue target by FY30 – all from 6 large customers. Orders were received from 4 (worth $100mn via these); for 2 customers, machining has started but will take 1Y more. Around 30% of production will start from 4QFY28 and 50% in FY29.

3) Incremental new order wins are expected from existing customers. It will not take 4Y to secure orders and complete validation; production can now begin within 2Y. The major challenge was customer acceptance, and having passed this phase, CAL believes it is likely to accelerate from here.

4) Sunbeam’s restructuring is largely complete; 90% completion expected by Dec-26. CAL is replacing 1-2-decade-old margin-decretive businesses with new ones; EBITDAM expected to touch mid-teens by 4Q even as revenue may be hit.

5) Hosur capex is for additional HPDC capacity (in phases over 2Y) covering 2Ws/PVs, as existing capacities have run out.

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