Buy AIA Engineering; target of Rs 1948: YES Securities

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YES Securities' research report on AIA Engineering

We retain FY22 volume estimates at 296k MT assuming i) Increase in annual grinding media volumes by 20-25k MT on a normalized base of FY20, ii) Approx. 10k MT contribution from mill lining solutions & ~70bps margin expansion over FY20-22 led by benefits of INR depreciation (~75% exports), launch of relatively high margin value added mill lining solutions & operating leverage play. The stock is currently trading at 24x FY22E earnings. It deserves premium multiple due to strong business MOAT.

Outlook

We remain optimistic on the business prospects with adjusted ROE (ex-cash) of 28% by FY22E, healthy FCF generation, prudent capital allocation & strong balance sheet. Retain ‘BUY’ with TP of Rs1948 at 28x FY22 EPS.

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