Buy AIA Engineering; target of Rs 4455: LKP Research

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.

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