Craftsman Automation Ltd Q1 FY27 Earnings Call: Heavy HP Powertrain Fills $100M Target, Guides Rs. 1,500 Crore Capex

Craftsman Automation Ltd held its Q1 FY27 earnings call on July 29, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Capacity Utilization & Segment Mix

• Powertrain utilization at ~70% in Q1 FY 2026-2027, with management’s annualized expectation of ~80%, though sustaining above 75% is difficult due to seasonality; a ~10% utilization gap versus optimum is expected to be bridged in Q2 FY27 or Q4 FY27.
• Aluminum segment operating at over 80% capacity utilization in Q1 FY 2026-2027, reflecting strong demand and recent capacity ramp-up.
• Industrial segment spike in Q1 FY27 driven by an upswing in material handling and storage divisions, with operating leverage improving margins; management expects the trend to sustain due to the capex cycle in India.
• Combined alloy wheel plants (Bhiwadi + Shoolagiri) expected to produce 4 million wheels in FY 2026-2027 against an installed capacity of 5.8 million, implying a ~69% utilization rate at the upper end of the guided range.
• Hosur Phase 1 utilization reached 85% as of Q1 FY 2026-2027, triggering a new CAPEX at unit three for high-pressure die casting (non-alloy wheel).

Aluminum, Kodavadi & Heavy Horsepower Powertrain

• Aluminum segment revenue on a growth path that will likely beat other segments, supported by massive investments and capacity ramp-up; the segment is two-wheeler heavy but balanced, with new orders entering production in FY 2027-2028 and FY 2028-2029.
• Kodavadi stationary engine target of $100 million for FY 2028-2029 is on track, and new inquiries could push revenue beyond that initial projection in FY 2030-2031 (management noted “new inquiries potentially taking it beyond that initial projection” for FY30-31).
• Heavy horsepower powertrain: six customers identified and orders received from four to five customers; the first $100 million revenue target for FY 2029-2030 is already filled for casting and machining, with management stating “the first $100 million revenue target for FY 2029-2030 already filled.”
• Production ramp timeline for heavy HP: 30% of production expected to be productionized by FY 2028-2029, 50% by FY 2029-2030, with full revenue visible in FY 2029-2030; casting validation for two pilot products will take about one year.
• EBIT margins for new powertrain expected to be in similar lines to current powertrain, but may appear depressed initially due to lower capacity utilization; return ratios should normalize within a couple of years.

Expansion Plans, Land Acquisition & Inflation Headwinds

• Consolidated capex guided at Rs.1,500 crores for FY 2026-2027, comprising maintenance capex at Sunbeam, Rs.430 crores for DR Axle (Die Casting subsidiary), and approximately Rs.1,000 crores for standalone Craftsman; management noted that if strong traction continues in Q2 and Q3 FY27, the board may increase capex later in the fiscal.
• Standalone Craftsman capex run-rate of Rs.1,000+ crores annually, but management is in a wait-and-watch mode pending demand trends over the next two quarters; capex is allocated to both powertrain and aluminum segments in proportion to growth opportunities.
• New Hosur CAPEX for high-pressure die casting (non-alloy wheel) triggered by 85% Phase 1 utilization; the Die Casting subsidiary has an approved CAPEX of Rs.430 crores, phased over multiple years, with some orders starting production in FY 2028-2029 and FY 2029-2030.
• Management “close to signing a deal” to acquire a new land parcel; greenfield plant basic infrastructure (land, building, utilities) costs Rs.100-200 crores before any production equipment, with land alone costing ~Rs.150 crores for 50 acres in one example.
• Cost to replicate 2016-vintage capacity is now 5 to 7 times higher: land up 8-9x, construction up 3-4x, and machinery roughly 2x in rupee terms; maintenance capex alone is estimated at Rs.200-300 crores annually given current depreciation of ~Rs.500 crores.
• Raw material cost pass-through is still being negotiated with some customers, but management expects all customers to fairly compensate for increased raw material prices.

Restructuring, Margin Trajectory & Revenue Mix Shift

• Sunbeam restructuring ~90% complete, with completion expected by December 2026; improved results are expected from Q1 FY 2026-2027 onward as the exit of low-margin legacy businesses (some over a decade old, partly outsourced to tiny scale industries) is phased with customer handholding.
• EBITDA margin target of mid-teens by Q4 FY 2026-2027, in line with Craftsman’s margins, driven by a shift toward higher-value orders from new customers and support from parent Craftsman.
• Potential 10-20% top-line reduction as the mix shifts toward higher value addition and legacy revenue is replaced; management is confident that margin expansion from better operating leverage and higher-value products will more than offset the volume decline.

India Capex Cycle, Demand Trends & Funding Strategy

• CAPEX cycle has started in India, driven by OEMs and Tier 1/2 companies, and management expects it to continue for a long time; India’s transition toward a manufacturing economy is cited as a key structural growth driver.
• Customers are announcing greenfield facilities of 1,500 acres and Rs.3,000-20,000 crores, and are looking for Craftsman to invest alongside them; management noted that new orders from existing heavy HP customers will likely take about two years to productionize, potentially by FY 2030-2031 (management cited “new orders from same customers will likely take two years to productionize, potentially by FY 2030-2031”).
• Future capex to be funded entirely through internal accruals; management stated there is “no ever need to come to the public markets” and confirmed the net debt-to-EBITDA ratio is “on track.”
• Board may increase FY27 capex if demand traction continues in Q2 and Q3 FY 2026-2027; management is monitoring demand trends closely before committing to additional standalone capacity.
• Seasonality remains a near-term headwind for powertrain utilization (sustaining above 75% is difficult), but the utilization gap is expected to close in Q2 or Q4 FY27.