Buy AIA Engineering; target of Rs 1948: YES Securities

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YES Securities' research report on AIA Engineering

AIA reported promising set of result as Sales/EBITDA/PAT came in 17%/41%/110% ahead of our estimates. Net sales were down 21% yoy owing to 47% yoy drop in non-mining volumes & 6% fall in realizations which were function of unfavorable mix & decline in ferrochrome prices. Adjusted EBITDA margin (incl. FX gain of Rs380mn) was at 27.8%, up 290bps yoy due to favorable currency movements. Net cash position improved by Rs3bn qoq to Rs17.5bn due to improvement in working capital from Rs12bn to Rs9.7bn. Mgmt. is aiming for flat volume growth in the rest of 9MFY21.

Outlook

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

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