New Plants And Automation Will Power India's Manufacturing Expansion

Key Takeaways

• Strong demand for lightweight, high-precision components and plant expansions position the company for sustained growth and improved operating efficiency.
  
• Diversified product segments and government policy support enhance revenue stability, margin resilience, and reduce dependence on any single market.
  
• Heavy CapEx dependence, margin pressure from lower-value segments, operational challenges abroad, cyclical risks, and geographic concentration expose the company to significant financial and execution headwinds.

Catalysts

Operates as an engineering company in India.

• Capacity ramp-up and strong order book visibility in new plants (e.g., Kothavadi, Bhiwadi, Hosur) align with accelerating localization of global supply chains and India's emergence as a preferred manufacturing hub for automotive and industrial components, positioning the company for 20%+ revenue growth and improving operating leverage as capacity utilization increases.
  
• The continued surge in demand for high-precision aluminum and lightweight engineered components-driven by the industry-wide shift toward lightweighting and energy-efficient solutions for auto and non-auto customers-creates long-term growth opportunities, supporting revenue and market share gains.
  
• Ongoing investments in automation, modernization, and productivity initiatives (e.g., semi-automation at Sunbeam, improved plant layouts, technology upgrades) are expected to drive margin expansion and increase earnings via cost optimization, headcount reduction, and enhanced process efficiencies.
  
• Craftsman's diversification across high-value segments (e.g., alloy wheels, data center engine components), combined with its ability to win new export and domestic orders from both traditional and emerging sectors, reduces dependence on any single segment, stabilizing cash flows and supporting more resilient long-term EBITDA and net margins.
  
• India's supportive government policies promoting domestic manufacturing, infrastructure growth, and 'Make in India' initiatives provide structural tailwinds-fuelling end-market expansion and incentivizing OEMs to source locally, which is likely to lift Craftsman's revenue runway and profitability over the medium to long term.

Craftsman Automation Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Craftsman Automation's revenue will grow by 14.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.3% today to 7.9% in 3 years time.
• Analysts expect earnings to reach ₹7.6 billion (and earnings per share of ₹278.77) by about August 2028, up from ₹2.1 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as ₹6.4 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 42.8x on those 2028 earnings, down from 72.4x today. This future PE is greater than the current PE for the IN Machinery industry at 34.0x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 15.15%, as per the Simply Wall St company report.

Craftsman Automation Future Earnings Per Share Growth

Risks

• Heavy reliance on capital expenditure (CapEx) to drive growth, combined with a significant net debt of ₹2,400 crores and a net debt to EBITDA ratio over 2x, could strain free cash flows and impact net margins or long-term return on equity, especially if growth projections or land sale do not materialize as planned.
  
• The company's margin profile has structurally declined from historical 20–21% EBITDA margins to the mid-teens (with management guiding for 16–17% at best), primarily due to an increased revenue share from lower-margin aluminum and alloy wheel businesses-this mix shift risks further long-term margin compression and weaker earnings resilience.
  
• Sunbeam and Craftsman GmbH (Germany) assets require further modernization and operational restructuring; ongoing challenges with obsolete equipment, high manual labor costs, and slow client additions suggest continued ramp-up risks, which could limit near
• to medium-term revenue growth and sustained improvement in consolidated profitability.
  
• Strong growth in aluminum and alloy wheel segments is contingent on consistent large customer orders and high utilization rates; any slowdown in auto/capital goods cycles, increasing global EV adoption reducing ICE (internal combustion engine) component demand, or delays/deferrals by OEM customers would directly impact revenue growth and segment profitability.
  
• Despite government/industry tailwinds, the company's limited global presence and focus on a few large geographies and customers make it more exposed to regional slowdowns, policy changes, or raw material price volatility (especially metals); this concentration risk could lead to revenue and earnings volatility and underperformance relative to more diversified, globally established peers.

Valuation

• The analysts have a consensus price target of ₹7354.625 for Craftsman Automation based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹8400.0, and the most bearish reporting a price target of just ₹6212.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹95.7 billion, earnings will come to ₹7.6 billion, and it would be trading on a PE ratio of 42.8x, assuming you use a discount rate of 15.1%.
• Given the current share price of ₹6399.0, the analyst price target of ₹7354.62 is 13.0% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.