Precision Camshaft, a leading camshaft manufacturer, is strategically focusing on the electric vehicle (EV) segment, which offers high-margin opportunities. The company plans to establish an EV plant in Solapur and is actively developing an electric powertrain specifically designed for sub-4-tonne LCVs (Light Commercial Vehicles).

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Precision Camshaft supplies various types of camshafts including cast iron, ductile iron, hybrid, and assembled camshafts, which are essential mechanical components of internal combustion engines.

The company's volume distribution consists of machine camshafts, accounting for approximately 33 percent of total volumes, and camshaft casting, which represents the larger portion at 67 percent.

The company claims a 9 percent market share in the global camshaft industry and 70 percent share in the domestic market. It boasts client portfolio, including renowned companies such as Ford, Toyota, Maruti Suzuki, Escorts, Royal Enfield, Bosch, and BMW.

As of FY23, the capacity utilisation for machine casting stood at 79.2 percent, while camshaft casting reached 79.8 percent. The company operates eight facilities, consisting of four foundries and four machine shops.

Additionally, Precision Camshaft has a global presence through two subsidiaries and two step-down subsidiaries, with operations in the Netherlands and Germany.

The company experienced a challenging period in FY21 due to the global weakness in the auto industry and higher commodity prices. However, it showcased steady revenue growth from Rs 709 crore in FY21 to Rs 1,080 crore in FY23. Unfortunately, the EBITDA did not demonstrate significant growth in FY23, following some improvement in FY22.

Despite the setbacks in FY21, the company achieved a turnaround, although the bottom line performance in FY23 remained flat. The company has a decent exposure to export markets, with 55 percent of revenues originating from international sources.

Precision Camshaft faces risks related to raw material pricing volatility, as its key raw materials include resin coated sand, pig iron, and MS scrap. Additionally, one of its Netherlands subsidiaries consistently reported losses, amounting to Rs 14 crore in FY23 compared to Rs 19 crore in FY22.

The majority stake in Precision Camshaft is held by promoters, accounting for 65.37 percent, with no significant institutional ownership. The stock is currently trading at 38 times its one-year forward earnings.

First Published:Jul 11, 2023 7:55 PM IST