Craftsman Automation Ltd (CRAFTSMAN) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to the earnings conference call of Craftsman Automation Limited. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the opening remarks are concluded. Should you require any assistance during the conference call, please signal an operator by pressing star, followed by zero on your touch-tone telephone. I now hand the conference over to Mr. Srinivasan Ravi, Chairman and Managing Director of Craftsman Automation Limited. Thank you, and over to you, sir.
Srinivasan Ravi (Craftsman Automation Ltd): Good afternoon, everybody, and thank you very much for joining the earnings call for today. I just want to touch upon briefly on the last two quarters and about the opportunity for Craftsman as well as the headwinds we had with the war, as well as the commodity prices, which was spiking very sharply, and now it is on a lower trajectory. So, we weathered all these situations. We have put up a lot of capacity. We still capacity is getting created, as we speak. Not all capacities have come into production. And some of the pipelines are not full yet. Yes. We are on a growth path, and we will be continuing this growth path into H2, as well as in the next two financial years. And the, some of the orders what we are doing is, some are short-term, medium-term prospects and also long-term prospects. The long-term prospects, the CapEx has been done bulk in the stationary engine side, which you all are be aware. The revenues will start from FY29 and go into FY30, where we'll peak at around $100 million. And the next level of peak, we're expecting
Srinivasan Ravi (Craftsman Automation Ltd): and the order book is also strong there. Sunbeam has gone through a very good transformation and we are in close contact with the customers on the way forward. Q3 and Q4 will be looking better for Sunbeam and next financial year, I think we will be also getting new orders from new customers. While we are leveraging the capacities for newer products, which will give better benefits, and also across all customers and all product lines, especially the legacy products, we are in contact with customers for the price rationalization or a price reset in cases of legacy products. And this has to be done for almost all suppliers is what we feel because of the sharp rise in manpower costs, energy costs, and all other associated costs. The capital goods cost has been steadily rising. I mean that any new projects cannot be done at old prices. So we are also very careful. One good thing about Craftsman is we have been continuously doing capex and bulk of the capex has been even before the big rise in the capital goods cost has increased. Now capital goods also it's not easy to put up capex because of the long gestation period. There's a huge bottleneck for supply of capital goods across the world. So we are in a strong position to win more orders and also we are winning more orders as we speak. We are a little more selective on the customers as well as the product, looking at the lifecycle and profitability. Since we have now the base which is stronger, and our ability to attract slightly larger customers with more profitable products for supply within India or outside India is better now and the position because of our bigger size. The growth in powertrain is expected to continue and also strong growth in aluminum. Yes, we have seen some correction of the margins in aluminum. That's not a correction, it's a temporary correction. We had increased our inventory because of the shortage of raw material and also the prices which were increasing dropped suddenly. So, we had an impact of that. So, with the price increase what we are negotiating with the customer or correction or compensation for the aluminum price correction also, which will play out in the coming two quarters, I think most of the customers are open to that discussion. We'll see that benefits coming into the next two quarters. Now I will leave the floor open for any Q&A.
Moderator: Thank you very much. We will now begin the question-and-answer session. Participants who wish to ask a question may please press star and one on their touchtone telephone. If you wish to withdraw from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Please note that some of the statements made during this earnings conference call may constitute forward-looking statements which are subject to risks and uncertainties and are not guarantees of future performance. We encourage you to refer to the disclaimer section in the company's investor presentation. Further, the management will now be addressing any customer-specific queries due to confidentiality obligations. Participants are requested to avoid mentioning customer names while asking questions. We also request participants to limit themselves to a maximum of two questions at a time so that all participants have an opportunity to ask their questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Moderator: The first question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead.
Chandramouli Muthiah (Goldman Sachs): Hi. Good evening and thank you for taking my questions. My first question is just around the gross profit line. I think that's easier line for you to manage growth on. First half, growth has been at about 30% YoY on on gross profit. 2Q has also been around that range. So just related to a lot of the business that you've been winning and the capacity that you've been adding, just want to understand over the next 12 to 18 months, when do you expect the inflection in in in gross profit growth, just related to all this capacity that's coming on board and the business that's been won?
Srinivasan Ravi (Craftsman Automation Ltd): Thank you for the question. I would say that this sort of growth will continue if you look on a year-on-year basis for quite next two quarters, three quarters. We are quite confident about the growth because of the past investments and past developments of the products and the pipeline which is already there, products being approved or plants coming on stream. other than the headwinds what we have had on the energy cost, mainly the gas, and also the aluminium spike which has lit a little ripple in this quarter, last quarter, otherwise, we feel that overall growth will continue in all the segments. In the powertrain, not all segments in powertrain. Of course, tractor we will see some contraction in the next two quarters. Apart from that, in powertrain, we'll see growth. So overall, growth on the powertrain is we are quite confident about that. Similarly, on the aluminium, the pipeline is quite long for the op whatever order wins we have. There there is some headwinds on the new plants where we have to put in the working capital in and we have to start of the plants which is also happening, and it is suboptimal as of now. So the operating leverage on those plants will take another two quarters to get into a profitable situation, more profitable situation. So, this is dragging down a little, but this is temporary, I would say. But whereas the mature plants are having an advantage on the operating leverage. But as I said earlier, bulk of the margins also will come from the price correction which has to happen across almost all the OEMs.
Chandramouli Muthiah (Goldman Sachs): Got it. That's helpful. And just a follow-up on the price correction, roughly what magnitude do you think you need to take price price hikes for the factors you mentioned, manpower, energy cost, and so on?
Srinivasan Ravi (Craftsman Automation Ltd): See, it depends from customer to customer, product to product also, and the time of the first when the order was placed. If the orders are placed in the last few quarters, I don't think that is feasible for any customer to give. But if there are the legacy products which are not corrected, and also the volume has contracted on the some of the legacy products where it is a drag, yes, it requires a big reset, I would say, in that case. And in certain cases, yes, it is more on manpower and power and other regular inflation which is belated. It may vary, but anywhere between 6-7% all the way to 15 to 20% will be there, depending on the commodity, the product, and the time of win of the order. And this I'm talking about not on the top line, but on the gross margin or the value-addition portion. So it might not it might not impact too much on the OEMs on the they're on the top line, I would say, as far as we are concerned. The top line maybe with the commodity prices, we cannot really put a number to it, what is the percentage there.
Chandramouli Muthiah (Goldman Sachs): Got it. Got it. That's helpful. And my second question is just around there has been recent news flow around one of the large domestic passenger vehicle manufacturers, and and their partnership now expanding with one of the global passenger vehicle manufacturers. So just want to understand there are some some news reports that there might be a local engine of the local passenger vehicle maker becoming an expanded scope in in the global platform in this partnership. So just want to understand your thoughts on how that situation's evolving.
Chandramouli Muthiah (Goldman Sachs): and and what the opportunity size could be for for a company like Craftsman?
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