This microcap robotics company has turned into a profit machine

With an order book of around  ₹820 million, the company looks set to maintain its momentum on profitability. (Photo: iStock)
With an order book of around 820 million, the company looks set to maintain its momentum on profitability. (Photo: iStock)

Summary

  • Affordable Robotic & Automation, the first robotics firm to be listed on the BSE, clocked a staggering 197% increase in profit after tax in FY24, causing its stock to surge 11% on 31 May.

When you hear the word robot or robotics, what’s the first thing that comes to mind?

For many of us, it’s the iconic movie Robot starring Rajinikanth. One important takeaway from it was the potential impact of robots on human lives.

The movie depicted a future in which robots could replace humans, and given the rapid advancements in robotics and AI, it's hard to deny that this fiction could one day be our reality.

For those who recognise the potential the robotics holds, we’ve identified a promising microcap robotics company to highlight today.

We are talking about none other than Affordable Robotic & Automation (ARA).

The company is a leading provider of turnkey automation solutions for industrial automation and the first robotics company to be listed on the BSE.

ARA offers automation solutions for welding lines using robotics and related design services, as well as material handling automation services and automated car parking systems.

ARA's services span three verticals: one-stop parking solutions, warehouse automation (including robotic welding solutions and robotic parking solutions), and proprietary software development.

The company has renowned clients such as Mahindra & Mahindra, Maruti Suzuki, Honda, TVS, Piaggio, Volvo and Eicher for automation. For car-parking solutions, its clients include Lodha, Shreepati Group, Parinee, Marvel, VTP Realty, Dhuleva Group and Swastik Group.

Over the past decade, the company has sold more than 5,000 robots and installed more than 10,000 car parking systems, serving customers in India, China, and other parts of Asia.

The company's proprietary software includes I-ware, which offers navigation using QR codes, warehouse management and robot control.

Its subsidiary ARAPL RaaS, launched in 2021, specialises in warehouse automation and autonomous robots for efficient movement of materials. The subsidiary is developing a mobile robotic multilevel car parking system using automated guided vehicles.

Recently, the company entered machine-shop automation, introducing two three-axis automated solutions designed for powertrain robots. It expects to generate about 400 million in revenue from the new business line by FY25.

Affordable Robotics’s FY24 results

On 31 May, Affordable Robotics’s stock shot up 11%.

As market participants, we are accustomed to seeing small fluctuations in share prices, often triggered by some news or a transaction by an institutional investor.

However, an 11% jump is not an everyday occurrence and should pique the curiosity of a rational investor.

In fact, the significant jump was driven by the company’s extraordinary growth. In FY24, the company saw a 43% year-on-year increase in revenue, primarily fuelled by 59% year-on-year growth in automation-segment revenue.

This substantial revenue jump, paired with a smaller rise in operating expenses, resulted in a staggering 95% year-on-year jump in operating profit.

Accordingly, profit before tax grew by 113% and profit after tax 197%.

What to expect

The company's stock price has been consolidating over the past six months. Its underperformance over this period could be due to the losses it incurred in the first half of FY24. However, on 31 May the stock hit a six-month high because of the significant increase in profitability.

With an order book of around 820 million, the company looks set to maintain its momentum on profitability.

Source: Google Finance
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Source: Google Finance

Since the start of 2024 the stock has risen 23%, with 12.9% of this coming after the company announced its FY24 results.

Affordable Robotics hit a 52-week high of 851 on 28 August 2023, and a 52-week low of 324 on 31 May 2023.

It currently trades at a price-to-earnings ratio of 110 and a price-to-book ratio of more than 6.

Here's how it stacks up against its peers.

Source: Screener.in
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Source: Screener.in

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

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