This Small Cap Engineering Stock Has Jumped Upto 149.72% Since IPO Launch, Should You Buy?

The stock price of Craftsman Automation Limited has surged exponentially by 149.72% since its IPO launch. A leading broking firm, Motilal Oswal also feels that the stock of Craftsman Automation will surge significantly. The brokerage house has asked investors to buy the stock of this small cap company, as the analyst feels that stock price will surge upto 19% based on the estimates. This Coimbatore based small cap engineering company that caters as an auto ancillary entity has shown consistent growth.

About Craftsman Automation

Craftsman Automation Limited was established in 1986 as a small scale industry in the southern Indian city of Coimbatore, has grown to become a leader in precision manufacturing in diverse fields. It is engaged in three major business segments: Automotive Powertrain (52% of revenues), Aluminum Die Casting (25%), and Industrial and Engineering (23%). Its entire operations are based out of India with 12 plants across the country.

The company's IPO was floated in March 2021. The stock price was listed at Rs 1,350 per share as against the issue rice of Rs 1,490 per share.

Craftsman Automation witnesses a consistent growth

According to Motilal Oswal research report, Craftsman Automation has showcased strong engineering capabilities over the years. " Its strong engineering capabilities are reflected in its ability to design its products and process, and design and manufacture its tooling and machines (special as well as general purpose) in-house. Over the last two decades, the company has been nurturing its businesses to scale organically, attaining market leadership in the powertrain segment as well as in storage solutions. It has a balanced exposure between autos (~62% in FY23E) and non-autos (~38% in FY23E) and no single end-user industry contributes more than 30%. The company has been able to increase its wallet share with key customers, as reflected in its increasing share of revenues from top-10 clients (from 53% in FY18 to 58% in FY22). This is despite adding new customers as share of revenue from long-standing relationships (>10 years) has declined to ~59% in
FY22 from ~78% in FY18. Also the company's demonstrated track record of creating and gaining market leadership organically is not very common in the auto component industry".

Buy stock of Craftsman Automation, with a target price of Rs 3,925

Motilal Oswal believes the stock price of Craftsman Automation will rise at a price Rs 3,925 per share from the value of Rs 3,300 per share and explains why it wants investors to buy it. "We expect a 13%/ 17% / 37% compound annual growth rate in standalone revenue / EBITDA / PAT over FY23E-FY25E, led by strong revenue traction, savings in input cost, and balance sheet deleveraging. Hence, RoE will improve by 4.6pp to 22.3% by FY25E. This has enabled the company to maintain its good balance of strong growth and superior capital efficiencies, placing it in the top quartile of the auto component industry. This is not yet fully reflecting in the valuations of 21.1x/16.8x FY24E/FY25E EPS. We initiate coverage on the stock with a BUY rating and a TP of ~INR3,925 (based on 20x FY25E standalone EPS)."

The stock price of Craftsman Automation ended at Rs 3,371.25 per share, with an intraday growth of 2.16%. Since March 2021, the stock price per share has grown by 126.46% till date. The market capitalisation is Rs 7,122.88 crore.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.