Craftsman Automation IPO: Brokerage Views

This post on Craftsman Automation IPO attempts to bring out consolidated brokerage views , subscription information, Grey Market Premium (GMP) and anchor investor information where applicable. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Craftsman Automation IPO or not.

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Craftsman Automation IPO: Grey Market Premium etc.

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Consolidated Brokerage Views on Craftsman Automation IPO

Ajcon Global: “We recommend “SUBSCRIBE to the issue for listing gains”. The investors fancy for companies catering to electric vehicles industry and good primary market conditions can surprise on post listing despite expensive valuations.”

Angel Broking :” In terms of valuations, the pre-issue P/E works out to 73x FY2020 earnings (at the upper end of the issue price band), which is high considering CAL’s historical two year CAGR top-line & bottom-line growth. Further, the company’s return ratios are also low compared to its other peers. Thus, we recommend NEUTRAL rating on the issue.”

Capital Market : ” Score 46/100 ;On post issue equity, the EPS for FY2020 stood at R 21.4. The upper price of R 1490, discounts the FY20 EPS by about 69.6 times. In comparison companies that have significant casting business or supplies cast and machined products to auto OEMs such as Endurance Technologies, Mahindra CIE, Nelcast, Ramkrishna Industries and Sundram Fastners quotes at a PE of 35 times, 62.4 times, 15.7 times, 181.3 times and 48.1 times of its FY20 consolidated EPS respectively. Alicon Castalloy quotes at a PE of 27.6 times of its consolidated FY20 EPS.And the upper price band discounts the annualised 9mFY21 EPS by about 46.6 times. The Endurance Technologies and Sundram Fastners quotes at a PE of 43.5 times and 53.8 times of its 9mFY21 annualised EPS. Mahindra CIE, Ramkrishna Forgings and Alicon Castalloy have reported loss for 9mFY21.”

Choice Broking: “If we annualize 9MFY21 performance, EPS derives at Rs32. At the higher price of Rs1,490, the issue is valued at P/E of 46.6x. Peers valuation include Endurance Technologies at P/E of 45x, Mahindra CIE at P/E of 63.4x and
Sundram Fasteners at P/E of 55.8x. • While CAL maintains strong operating efficiency and has also operating leverage advantage, we are concerned over high debt level and poor RoE, the improvement on both fronts requires strong business growth and favourable movement on NPM front. Further, the IPO issue consists a higher amount of OFS of Rs6,737 mn
which also disappoints as contrary to this or higher fresh issue size can be utilized by firm to reduce debt level significantly.
Considering all these parameters, we assign ‘Avoid’ rating to issue”

KR Choksey: “At the upper band of issue price, Craftsman Automation Ltd. will trade at a Price/EPS multiple of 59x of its annualized 9MFY21 financials, which is below its peers. We believe that the current price band is undervalued, looking at the growth potential in the company and anticipate listing gains and give a ‘SUBSCRIBE’ rating to Craftsman Automation IPO..”

Nirmal Bang: CAL’s margins are well above peers on the back of its leadership position in the highest value segment amongst all engine parts of – cylinder heads and cylinder blocks. ROCE is in-line with industry peers and accordingly the P/E multiples are also broadly in line with peers. With the auto upcycle having commenced and aggressive repayment of debt (to decline to Rs. 770 Cr by end of FY21 against Rs. 1041 Cr in FY20), return ratios are likely to witness a strong uptick. Q3FY21 ROCE has already bounced higher to 22% against 12% in FY20. Based on (i) presence in high end machined components, (ii) upturn in auto industry having commenced (iii) rising mix of non-cyclical, high growth storage solutions business and planned entry into automated storage systems, (iv) Expansion of return ratios and (v) comparatively cheaper P/E multiple on Q3FY21 annualised earnings; we recommend to subscribe to the issue from a long term perspective.”

SMC: “Score 3/5 ; Craftsman Automation is a niche player that provides cloud-communication platform as a service to enterprises, over-the-top players and mobile network operators. However, its business depends on the success of their relationship with mobile network operations. It relies on 3rd party technology systems and Infrastructure where defects, delays and failures can adversely affect its business. Its revenues come through a limited number of clients. Ahigh risk investor may opt the issue”

SP Tulsiyan Website: “Expected revival in capex cycle, high gross margin business, quality management and discount valuation to peer, make this IPO attractive. Hence, we recommend a subscribe to the IPO.”


Standard disclaimer: Standard disclaimer: I am not a SEBI registered analyst /investment adviser and above information is collated from various online sources and is for educational purpose only. Please visit individual brokerage sites to read the actual reports. Please do not make your investment decisions based on this info as it is not complete and exhaustive. Please do your own due diligence as stock market investments have high degree of inherent risk.

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