Craftsman Automation reported a quarter marked by strategic adjustments and capacity expansions. While overall operating margins remained stable, specific segments like Aluminium faced sequential dips due to new plant startup losses and commodity price volatility. The company is focused on improving Sunbeam's profitability, expanding Powertrain capacity, and leveraging a strong order book in stationary engines, while actively managing debt and rationalizing non-core assets.
vs Q4 FY26
| Metric | Value | YoY |
|---|---|---|
| Operating Margin | 15.3% | — |
| DR Axion EBITDA Margin | 20% | — |
Segment Breakdown
| Metric | Latest | Trend |
|---|---|---|
| EBITDA Margin | 15% |
Total Value
USD 60 million
as of 2025-12-31
Composition
"The order book for stationary engines is currently at an annual level of $60 million, with a target to reach $100 million revenue by FY29/FY30."
| Category | Headline | |
|---|---|---|
Capex | ₹1,000 crores | |
Debt | 2.5x EBITDA | |
M&A | Aluminium piston asset divestment · closed |
| Category | Target | Priority |
|---|---|---|
| Capacity | Aluminium production ramp-up→reasonable level | Medium |
| Capacity | Powertrain capacity addition→5-10% | High |
| Utilization | Alloy wheel utilization levels→60-70% plus | High |
| Profitability | Sunbeam EBITDA margin→10% | High |
| Profitability | Sunbeam EBITDA margin→higher than 10% | High |
| Profitability | Industrial & Engineering segment margin→expansion | Medium |
| Profitability | DR Axion margin expansion→expansion | Medium |
| Revenue | Stationary engines annual revenue→$100 million | High |
| Revenue Growth | Industrial Engineering revenue growth→high single digit or low double digit | Medium |
| Revenue Growth | Powertrain revenue growth→high single digit or low double digit | Medium |
| Revenue Growth | Aluminium products revenue growth→high teens | Medium |
| Debt | Net Debt to EBITDA→1.5 | High |
| Debt | Net Debt to EBITDA→1:1 | High |
| # | Metric | |
|---|---|---|
| 01 | Aluminium production ramp-up at Shoolagiri | |
| 02 | Alloy wheel utilization levels | |
| 03 | Sunbeam EBITDA margin improvement | |
| 04 | Net Debt to EBITDA ratio | |
| 05 | Powertrain capacity addition |
| Severity | Risk |
|---|---|
medium | Commodity Price Volatility (Aluminium) Aluminium prices have been violent, causing short-term optical margin reductions, though pass-through to customers exists. Management |
medium | New Plant Startup Losses New plants (Shoolagiri, DR Axion) incur operational losses and pre-operative costs during ramp-up, impacting margins for a few quarters. Management |
medium | High Capex and Debt Levels Current consolidated Net Debt to EBITDA is 2.55, with significant capex planned (INR1,000 crores this year) for growth and capacity expansion. Management |
medium | Slower Pace of ICE to EV Transition for Aluminium Content While light weighting benefits EVs, significant increase in aluminium content requires new OEM platforms, which are not being adopted as quickly as desired. Management |
For Q3 FY26, the company's overall operating margin hovered around 15% to 15.3%. The aluminium standalone margins experienced a sequential dip due to startup losses at the new Shoolagiri plant, which is expected to ramp up production by Q2 next year. Alloy wheel utilization remains below 50% of the 5.8 million capacity, with margins not yet reaching double-digit levels, but management anticipates 60-70% utilization by Q3 next year. The Industrial and Engineering segment saw a sharp jump in EBIT margin, which is deemed sustainable with expected expansion in the next financial year.
The heavy lifting for Sunbeam's turnaround is complete, with EBITDA margins expected to improve from Q2 next year, targeting 10% by year-end from the current 7%. As part of simplifying Sunbeam's business model, the company divested its aluminium piston asset to Shriram Pistons, which generated approximately INR30 crores in revenue from two customers. This move is aimed at focusing on core competencies and improving efficiency, as 95-97% of the company's revenue now comes from 4-5 key customer groups.
Craftsman Automation plans a standalone capex of approximately INR1,000 crores for the current year, primarily for capacity expansion. The consolidated Net Debt to EBITDA ratio stands at 2.55 on a 9-month annualized basis. The company aims to stabilize this ratio at 1.5 and considers below 2.0 comfortable. Management indicated that with a 5% growth rate, a 1:1 Net Debt to EBITDA ratio could be achieved within two years, and mentioned land assets worth INR350 crores available for sale to aid debt reduction.
The stationary engines segment has an order book at an annual revenue level of $60 million, with a target to reach $100 million by FY29/FY30, driven by demand from data centers and AI. Revenue growth for Industrial Engineering and Powertrain segments is projected to be in the high single-digit to low double-digit range, while aluminium products are expected to grow in the high teens. The company plans to add 5-10% capacity in the Powertrain business over the next 12 months.
The company acknowledges the benefits of light weighting for both ICE and EV vehicles, particularly for increasing EV range and reducing battery costs. However, a significant increase in aluminium content in passenger vehicles, especially for EVs, requires OEMs to adopt new platforms and designs. While this transition is happening, management notes it is not at the desired pace, as new plant builds are necessary for OEMs to incorporate substantial changes.