Craftsman Automation: Growth Shines, But Are Valuations Too High? Motilal Oswal's Neutral View

Industrial Goods/Services

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Updated on 12 Nov 2025, 03:37 pm

Motilal Oswal Securities has released a research report on Craftsman Automation Engineering Limited, rating it 'Neutral' with a price target of INR 6,542. The report notes that Craftsman Automation's consolidated profit after tax (PAT) for the second quarter of FY26 was INR 912 million, surpassing Motilal Oswal's estimate of INR 863 million. This beat was primarily due to better-than-expected revenue growth, particularly in the aluminum segment.

The aluminum business is anticipated to be a key growth driver, fueled by the ramp-up of its alloy wheel facilities in Bhiwadi and Hosur, consistent order visibility from domestic and international clients, and the expected positive impact from the restructuring of Sunbeam starting FY27.

However, the report points out that powertrain margins are likely to remain under pressure in the short term. This is attributed to the company's development of products for data center applications, which are significantly high-gestation projects requiring 3-4 years for the start of production (SOP).

Considering the recent surge in the stock price, Motilal Oswal believes most positive developments are already reflected in its current valuation multiples. The stock is trading at 42.7 times its estimated earnings per share (EPS) for FY26 and 29.1 times for FY27. The price target of INR 6,542 is based on a valuation of 24 times September 2027 estimated EPS.

Impact: This neutral rating and valuation analysis can influence investor sentiment and potentially moderate the stock's short-term price movement. Rating: 6/10

Difficult Terms Explained: Consolidated PAT (Profit After Tax): This refers to the total profit of a company and all its subsidiaries after deducting taxes. It provides a comprehensive view of the company's profitability. Revenue Growth: An increase in the income a company generates from its primary business activities over a specific period. Aluminum Segment: A division of the company that manufactures products made from aluminum. Alloy Wheel Facilities: Manufacturing plants specifically designed to produce wheels for vehicles made from metal alloys, often aluminum. Order Visibility: The degree of certainty about future sales orders that a company can anticipate. Domestic and Export Customers: Clients located within the company's home country (domestic) and those located in other countries (export). Restructuring of Sunbeam: This involves reorganizing the operations, management, or financial structure of a related entity named Sunbeam. FY27E (Fiscal Year 2027 Estimates): Projections for the company's financial performance during the fiscal year ending in 2027. Powertrain Margins: The profitability of the components that generate power and transmit it to the vehicle's wheels, such as the engine and transmission. Data Center Applications: Products or services designed for use within data centers, which house and manage large amounts of digital information. High-gestation Projects: Investments or development initiatives that require a long period before they begin to yield returns or start production. SOP (Start of Production): The point in time when a manufacturing process officially begins producing goods for sale. Stock Run-up: A significant and rapid increase in the price of a company's stock. Factored in: When the current market price of a stock already reflects expected future events or performance. Consolidated EPS (Earnings Per Share): The portion of a company's combined net profit (including subsidiaries) allocated to each outstanding share of common stock. Neutral: A stock recommendation from a brokerage that suggests investors should neither buy nor sell the stock, indicating it is considered fairly valued. TP (Target Price): A price level that a stock analyst or brokerage firm forecasts for a particular stock over a specific period. Sep'27E EPS: The estimated Earnings Per Share for the company projected for the period ending in September 2027.