ICICI Direct recommended hold rating on AIA Engineering with a target price of Rs 1785 in its research report dated August 14, 2019.
ICICI Direct's research report on AIA Engineering
AIA Engineering (AIA) reported revenues at Rs 733.3 crore (vs. estimate of Rs 801.2 crore) with marginal growth of 2.5% on a YoY basis. EBITDA came in at Rs 168.6 crore vs. our estimate of Rs 178.8 crore. However, EBITDA margins improved 130 bps YoY owing to some decline in raw material cost, which is likely to continue and help improve margins for FY20. AIA reported PAT at Rs 139.5 crore, up 33.9% YoY (vs. estimate of Rs 124.3 crore) aided by lower effective tax rate and higher other income. Other income was at Rs 38.6 crore, up 91% YoY (vs. estimate of Rs 25.1 crore).
However, working capital management and recovery of volumes from Brazilian customer will be closely monitored. We expect overall revenues, PAT to grow at a CAGR of 11.0%, 8.3%, respectively, in FY19-21E. We believe AIA could benefit significantly from further penetration in mining segment, technical collaboration with EEMS and recovery in non-mining segment. We revise our target price to Rs 1785/share (28x FY21E EPS) and change our rating from BUY to HOLD.
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