LKP Research's research report on AIA Engineering
AIA Engineering Limited (AIAE) reported a significant 19% YoY decline in consolidated sales, reaching ₹10.4 bn, which fell short of our and consensus expectations. This drop was largely driven by a 22% fall in volumes, totaling 60,330 MT. Contributing factors included a slowdown among certain mining clients—indicating both systemic and cyclical trends— inventory de-stocking by a few major customers, and increased freight costs amid ongoing shipping challenges. While these issues have delayed the transition from forged media to high chrome grinding media, realizations did see a positive uptick, rising 4% YoY and 3% QoQ. On the margins front, gross margins improved by 110 bps YoY to 58.9%, but EBITDA margins fell by 310 bps to 26.4%. As a result, profit after tax decreased by 21% YoY to ₹2.6 bn, missing estimates. Looking ahead, AIAE anticipates a reduction in FY25 volumes by 25,000 MT to 30,000 MT.
Outlook
However, medium to long-term prospects remain strong as the company is pursuing significant contracts that could substantially boost volumes. In light of the volume decline and H1 performance, we have revised our EPS estimates downward for FY25E and FY26E. Consequently, we are maintaining a BUY rating, with a revised target price of ₹4,455, reflecting the current near-term challenges.
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