*Craftsman Automation Q2FY22 Concall Update*
(Nirmal Bang Securities)
*Outlook: Positive*
• Consolidated revenue was up 54% YoY at 571 Cr. Revenue appears high due to commodity price inflation which has inflated sales by 20% compared to Q4 sales.
Auto Powertrain revenue (51% mix) came in at 292 Cr, up 60% YoY.
Auto Aluminum Products revenue (20% mix) came at 113 Cr, up 36% YoY.
Industrial & Engineering revenue (29% mix) came at 166 Cr, up 57% YoY.
• Gross Profit Margins came at 53.9% vs QoQ 55.4%, YoY 57.6%. Despite this, EBITDA Margin came at 25.1% vs QoQ 24.8%, YoY 27.3% owing to operating leverage.
• EBIT margin was healthy for Auto Powertrain at 29.4% vs QoQ 26.9% & YoY 22.6%.
• EBIT margin improved for Auto Aluminum Products at 6.6% vs QoQ -6.1% & YoY 1.7%.
• However, EBIT margin declined for Industrial & Engineering to 7.4% vs QoQ 10.2% & YoY 21.6%. Competition is very high in storage solutions and so margins are under pressure.
• Auto powertrain revenue mix: CVs 51%, Tractors 21%, OTR 20%, PV 8%.
• Capacity utilization even during good qtr of Q4FY21 was at 70% and was at 60% during Q2FY22. Co has created good capacities and so there will be operating leverage once demand picks up.
• Co will run out of capacities in Auto Aluminum in FY23 as it has been able to add new PV clients (apart from mostly 2W clients traditionally). Thus going forward contribution from PVs could be the same as 2W by FY23/24 vs 80% in favour of 2W as of now.
• EV evolution will be positive for Auto Aluminum Products as all new platforms will involve aluminum instead of steel.
• Storage solutions revenue for Q2 was Rs. 84 Cr and in Q1 was Rs. 50 Cr against Rs. 104 Cr for entire FY21.
• Debt/equity remains at 0.7x.
• Debt will reduce by 150 Cr in FY22 to Rs. 550 Cr. Capex will be at 180-190 Cr, higher than historical trend due to inflation in steel prices impacting machinery and building costs. Industrial & Engg segment does not require much capex.
Stock is trading at P/E of 26.5x Q2FY21 annualised EPS