Buy AIA Engineering; target of Rs 1767: Edelweiss

Edelweiss's research report on AIA Engineering

AIA Engineering’s (AIA) Q4FY18 revenue jumped 15% YoY led by a strong ~14% YoY volume spurt (mining volume up a strong ~27% YoY). However, EBITDA margin slipped ~230bps YoY due to higher raw material cost. Management maintained FY19-20 volume guidance of incremental 40-50,000MTPA implying ~18% CAGR over FY18-20.

Outlook

Led by improving volume visibility in long-term contracts, low penetration (10-12%) & strong opportunity in global gold and copper mining, we maintain ‘BUY’ with TP of INR1,767 (valued at 28x FY20E EPS). At CMP, the stock trades at 23.9x FY20E EPS.