Feb 16, 2017 01:45 PM IST | Source: Moneycontrol.com
Buy AIA Engineering; target of Rs 1723: Edelweiss
Edelweiss is bullish on AIA Engineering has recommended buy rating on the stock with a target price of Rs 1723 in its research report dated February 14, 2017.
Edelweiss' research report on AIA Engineering
AIA Engineering’s (AIA) 20% revenue (INR 5.9bn) and 16% EBITDA (INR 1.7bn) growth surpassed our estimates by 10% and 12%, respectively. Volumes jumped 28% YoY with mining volume surging 49% (31% in Q2FY17). Gross margin dropped 335bps YoY on account of surge in ferrochrome prices. Management guided for continued strong volume growth, with incremental volume of 120,000MT over 3 years (implying volume CAGR of 20% over FY17-19E).
Uptick in mining sector as commodity prices rise, and mere 10-12% penetration of high chrome grinding media will drive 20% volume growth (FY17-19E). We have assumed capacity utilisation of 71% in FY19E, entailing scope for further volume growth. At CMP, the stock trades at 20.6x FY19E EPS. We upgrade to ‘BUY’, based on 25x FY19E.
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