Craftsman Automation Rebounds 6%, Hits 8-Month High on Better Outlook
Shares of Craftsman Automation (CAL) hit an eight-month high at Rs 2,524 as the stock rose 6% on BSE during Friday’s intraday trading on improving trade prospects.
The automotive auxiliary company’s stock traded at its highest level since November 2021. It had reached a record high of Rs 2,772.80 on November 1. The company had made its public debut on March 25, 2021.
CAL manufactures multiple components and sub-assemblies on a make-and-work basis to customer specifications in the automotive, industrial, and engineering segments. Automotive segment key products include powertrain products, cylinder blocks, cylinder heads, camshafts and crankcases for commercial vehicles (CV), sport utility vehicles, two-wheelers, equipment agricultural, earthmoving and construction equipment.
The company counts all major automotive OEMs and major players in the industrial sector among its major customers. In the automotive segment, its main customers are Daimler India, Tata Motors, Ashok Leyland, M&M, TVS Motors, Royal Enfield, among others. Meanwhile, the industrial and engineering segment customer base includes Siemens and Mitsubishi Heavy Industries.
After an unprecedented downturn in the auto industry that saw domestic volumes drop 20-60% across all segments (except tractors) in FY19-21, the auto industry is expects a strong cyclical recovery to occur in FY21-25.
CAL is confident that it can capitalize on future opportunities and meet future challenges with agility to meet shareholder expectations for sustainable growth and profitability.
“The main areas of focus for the business are reducing debt and therefore saving interest costs, increasing value added per product, maintaining EBITDA levels, l ‘improved profitability in aluminum and storage businesses and improved share in non-automotive businesses,’ the company said. in the annual report for fiscal year 22.
CRISIL Ratings analysts believe that CAL will benefit from its established market position, strong customer relationships and sound operational efficiency. The financial risk profile will continue to benefit from higher cash accumulation thanks to stable business performance, moderate investment plans and gradual debt repayment.
On July 5, the rating agency raised its rating on CAL’s long-term bank facilities from ‘CRISIL A/Stable’ to ‘CRISIL A+/Stable’ and reaffirmed its rating on short-term bank facilities at ‘CRISIL A1’.
Underscoring the rationale for the upgrade, analysts believe it reflects a sustained improvement in medium-term business performance, driven by the resumption of levies in the automotive sector.
“The company is well positioned to capitalize on the upside demand scenario given its established customer base, diversified exposure to the segment, and sound operational capabilities, including enhanced production capabilities,” added CRISIL Ratings.