Craftsman Automation Limited Q3 FY26 Earnings Call Summary

Summary

Craftsman Automation Limited - Q3 FY26 Earnings Call Summary Thursday, January 29, 2026 4:00 P.M. IST

Event Participants

Executives 1 Srinivasan Ravi (Chairman and Managing Director)

Analysts 5 Abhishek Jain (AlfAccurate Advisors), Ajox Frederick (Sundaram Mutual Fund), Himanshu Singh (Baroda BNP Paribas), Mukesh Saraf (Avendus Spark), Mumuksh Mandlesha (Anand Rathi), Nikhil Rao (iThought PMS)

Financials & KPIs

Geographic & Segment Commentary

• Aluminium: Standalone margins were impacted by operational losses at the new Shoolagiri plant during its proofing phase. Management noted that commodity price volatility (Aluminium up ~16%) creates an optical margin contraction despite stable value-addition, as material costs are a direct pass-through.
• Industrial & Engineering: This segment saw sharp EBIT margin expansion due to improved operating leverage and consolidation in the supplier base. Craftsman is currently the second-largest player in India for static racking and a leader in automated storage solutions.
• Powertrain: Demand is shifting toward higher engine and gearbox capacities (400+ HP) in the commercial vehicle (CV) segment. Tractor volumes remain strong, with additional benefits accruing from the increasing average horsepower of domestic units.

Company-Specific & Strategic Commentary

• Alloy Wheel Expansion: The 5.8 million unit capacity plant is currently below 50% utilization due to BIS approvals and model validation. Management expects high single-digit margins and 60-70% utilization by Q3 of the next fiscal year.
• Sunbeam Restructuring: Heavy restructuring is complete; the company is exit-moding 10 retail customers representing 5% of revenue to focus on core high-value clients. Future orders are being targeted at a $10M–$30M entry threshold.
• Kothavadi Strategic Project: Focused on high-end stationary engine parts for data centers/AI backup power. The project target remains $100 million in revenue by FY29-30, with the first major invoicing expected in 18 months.
• Asset Monetization: The company holds land valued at ₹350 crores for potential sale. Management remains patient for optimal pricing to reduce debt rather than pursuing a distressed sale.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Stationary Engine Growth

• Question: What is the split for the $100M engine order book? (Nikhil Rao)
• Answer: Customers don’t specify prime vs. backup power as products are fungible. Current annual run rate is ~$60M, with the balance $30-40M expected to be tied up by next year for an FY29/30 peak. (Srinivasan Ravi)

Sunbeam Margin Recovery

• Question: When will Sunbeam reach double-digit margins? (Mukesh Saraf)
• Answer: Margins will improve from Q2 next year. We expect to end the current year at 7% EBITDA total, but the Q4 exit rate should exceed 10% as we rationalize low-value customers. (Srinivasan Ravi)

Aluminium Margin Contraction

• Question: Why did standalone aluminium margins dip 200-500 bps? (Abhishek Jain/Himanshu Singh)
• Answer: Primarily due to start-up costs at the Shoolagiri alloy wheel plant and inventory corrections by OEMs in December. High aluminium prices also artificially lower the margin percentage even if absolute value-add is stable. (Srinivasan Ravi)

Debt and Capex Strategy

• Question: What are the plans for debt reduction and capex? (Abhishek Jain)
• Answer: Annualized Net Debt/EBITDA is 2.55x. We are investing ₹1,000 crores in capex to build capacity for $50M-$100M orders that global OEMs won’t place without proven infrastructure. Debt will normalize as these assets sweat. (Srinivasan Ravi)

Key Takeaway

Craftsman Automation delivered a quarter marked by strategic expansion, adding approximately ₹1,000 crores to its top-line run rate compared to its IPO period, though margins faced temporary pressure from new plant start-ups at Shoolagiri and commodity-linked optical compression. The company is successfully transitioning from a standalone entity to a diversified group, with Passenger Vehicles now contributing 34% of consolidated revenue and a clear roadmap for Sunbeam to reach 10%+ EBITDA margins by Q4. Strategic focus remains on high-end engineering for data center engines ($100M target) and a long-term bet on the resilience of ICE/Hybrid platforms through light-weighting. While Net Debt to EBITDA remains elevated at 2.55x due to aggressive capex, management intends to leverage operating growth and potential asset sales of ₹350 crores to bring this down to 1.5x. Looking ahead, the company expects high-teens growth in the Aluminium segment and continued expansion in Industrial Engineering as it consolidates its position as a top-tier Indian supplier for global OEMs.