Buy AIA Engineering; target of Rs 1880: ICICI Direct

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ICICI Direct's research report on AIA Engineering

AIA Engineering reported better-than-expected Q4FY18 results. Revenues were at Rs 743.9 crore vs. our estimate of Rs 640.8 crore posting strong growth of 14.9% on a YoY basis. The other operating income was at Rs 49.5 crore due to increase in treasury income and foreign gains. FY18 revenues grew 9.7% to Rs 2374.8 crore During Q4FY18, AIA’s volumes grew 14.3% to 66375 MT owing to robust growth in the mining segment, which grew 27% to 37591 MT. For FY18, sales volumes grew 6.6% to 228724 MT. Net realisation per tonne grew 3.9% YoY to Rs 108.5 per kg EBITDA came in at Rs 166.0 crore, higher than our estimate of Rs 142.9 crore. EBITDA margins came in at 22.3%, in line with our estimates but declined 230 bps YoY on account of increased raw material expenses and commodity prices PAT came in at Rs 151.2 crore vs. our estimate of Rs 102.1 crore, registering robust growth of 31.9% on a YoY basis mainly on account of higher other income and lower tax outgo.

Outlook
We believe AIA could benefit significantly from the recent recovery in sales volumes in the mining segment and recent technical collaboration. We revise our target price upward to 30x FY20E to arrive at a target price of Rs 1880. We revise our rating on AIA from HOLD to BUY.

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