Started in 1986, Craftsman Automation Limited is a Coimbatore - Tamil Nadu based diversified engineering company with vertically integrated manufacturing capabilities, engaged in three business segments, namely powertrain and other products for the automotive segment ('Automotive - Powertrain and Others'), aluminium products for the automotive segment ('Automotive – AluminiumProducts'), and industrial and engineering products segment ('Industrial and Engineering'). Company's manufacturing facilities include aluminium foundries, pressure die casting facilities, machining and allied facilities, heat treatment, fabrication, and assembly facilities. They are the largest player involved in the machining of cylinder blocks and cylinder heads in the medium and heavy commercial vehicles category and are amongst the top three players in machining for the tractor segment. (Source: CRISIL Report) Within the Industrial and Engineering segment, they have utilised in-house engineering and design capabilities and developed a diverse product portfolio including material handling equipment such as hoists, crane kits, industrial gears, gear boxes, locomotive components, other railway products, storage solutions, marine engines and accessories, tool room, mould base products and Special Purpose Machines ('SPM'), which includes metal cutting and non-metal applications such as washing and leak testing solutions. Company has long term relationships with several marquee domestic and global original equipment manufacturers ('OEMs') and component manufacturers across the three business segments. Their key customers include Daimler India, Tata Motors, Tata Cummins, Mahindra & Mahindra, Royal Enfield, Mitsubishi Heavy Industries, SiemensIndia, Escorts, Ashok Leyland, Simpson & Company, VE Commercial Vehicles, TAFE Motors and Tractors, Perkins India, John Deere and JCB India. They are considered as a strategic and preferred supplier by many of the OEM customers and are also the single source supplier in certain product categories, for some of the key customers. CAL owns and operates 12 strategically located manufacturing facilities across seven cities in India, with a total built up area of over 1.5 million sq. ft. The facilities are equipped with advanced machinery, including imported stateof-the-art computer numerical control ('CNC') machine tools and die casting machines and certain of the facilities are located close to the key customers to enable meeting customers' just-in-time delivery schedules, allow economies of scale and logistical advantages for each of the customers, and to insulate them from local supply or other disruptions. Three of its facilities, forming flagship integrated facility, are located in the outskirts of Coimbatore in the State of Tamil Nadu. Company also has an integrated facility for aluminium pressure die casting, machining and SPM manufacturing at Bengaluru in the State of Karnataka. Other manufacturing facilities are satellite facilities located across automotive and engineering hubs in India and close to the key customers, including two manufacturing facilities located at Pune in the State of Maharashtra, two manufacturing facilities located at Ballabgarh near Faridabad in the State of Haryana, and one manufacturing facility each located at Sriperumbudur, near Chennai in the State of Tamil Nadu, Jamshedpur in the State of Jharkhand, and Pithampur near Indore in the State of Madhya Pradesh. Further, CAL has two wholly-owned overseas subsidiaries, namely, Craftsman Marine B.V. and Craftsman Automation Singapore Pte Limited. Craftsman Marine B.V. was set up in 2008 in Netherlands, through which they are engaged in marketing, sales and servicing of marine engines, engineering products and accessories for propulsion, manoeuvring and steering parts, storage, electronic instruments, deck equipment and spare parts for all the engines and other equipment used in yachts. These products are manufactured and assembled by company in India and sold under the name 'Craftsman Marine' by the subsidiary. Craftsman Automation Singapore Pte Limited, also set up in 2008 in Singapore, which is the strategic sourcing centre for overseas procurement, primarily for procurement of aluminium ingots, which is one of the key raw material. CAL also has a joint venture in India, Carl Stahl Craftsman Enterprises Private Limited, which is engaged in marketing, installation, commissioning and rendering after-sales services of material handling equipment, such as chain hoists, rope hoists and cranes kits, manufactured by CAL under the name 'Carl Stahl Craftsman'. As of September 30, 2020, Company owns and operates seven manufacturing facilities located in Bangalore, Coimbatore, Faridabad, Jamshedpur, Pithampur, Pune and Sriperumputhur. As of March 31, 2018, 2019 and 2020, their total installed production capacity was 71,26,000, 71,00,000 and 62,65,800 and capacity utilisation was 71%, 89% and 93% respectively . Company's management team has a total 259 people, which is supported by a large workforce of 1,372 qualified and skilled permanent workmen, 755 apprentices, and 1,214 contract workmen, as on December 31, 2020. So total 3600 employees are on payroll. As per financial performance, Craftsman has posted total income/net profits of Rs. 1,522.86 cr. / Rs. 25.60 cr. (FY18), Rs. 1,831.64 cr. / Rs. 87.81 cr. (FY19) and Rs. 1,501.05 cr. / Rs. 41.70 cr. in FY20. For upto Q3 of FY21, it has reported net profit of Rs. 52.71 cr. on total revenue of Rs. 1,029.90 cr. So company has posted consistent growth over last couple of years. CAL has posted an average EPS of Rs. 28.95 and average RoNW of 9.24% for last three fiscals. Issue is priced at a P/BV of 4.19 as per NAV of 355.93 on 31.12.20. As per FY20 earnings, P/E is around 75. If we attribute latest annualised earnings of FY21 on fully diluted equity post issue, then asking price is at a P/E of around 45. So issue looks fully priced. As per RHP, the listed peers are shown in above table. On BRLM's front, two BRLMs are associated with this IPO, and have handled around 16 IPOs in last three fiscals, and from last 10 IPOs, 3 opened below issue price and remaining opened above issue price on the day of listing. As of now, from last 10 IPOs, 2 are trading below price and remaining are trading above issue price. ( As on 08.03.2021 ) As per financials, results are good, RoNW is 9.24% for last three fiscals and issue looks fully priced with respect to current earnings. The auto-mobile component industry is going from tough time due to pandemic, but expected to do well in future. So good growth can be expected in next couple of years. Performance of BRLMs is good. So we give SUBSCRIBE rating to this IPO for listing gains.
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