January 23, 2017 / 17:31 IST
AIA Engineering (AIA) is set to be one of the largest grinding media consumables companies globally. The increasing penetration of cast high chrome (HC) balls in an industry dominated by forged balls presents a unique opportunity. AIA is well placed to capitalize given its operational superiority over sector leaders and improving acceptance of its offerings by leading miners across diverse geographies.
Outlook
We value the stock at 25.0x FY19 EPS, given revival in earnings growth (11% CAGR), normalization of return ratios to decade-ago levels and low exit utilizations (60% in FY19). We note that the recent sale of MolyCop, to American Industrial Partners, pitches its valuations at US$ 1.23bn or 7.9x June-16 reported EBITDA vs AIA at 14x (1yr Fwd).
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