Hold AIA Engineering; target of Rs 860: Edelweiss

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26 Aug, 2025 12:21

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Edelweiss's research report on AIA EngineeringWe met management of AIA Engineering (AIA) to gauge the structural opportunity in the mining business. Management maintained its positive stance on the structural opportunity owing to: 1) conversion of traditional grinding media to ferro chrome media with levers like huge primary media market at 60% of overall grinding media market, but only ~15% of AIA’s sales; 2) strong addressable market (~1.5mn) in gold and copper, with AIA having mere ~40-50K MT volumes from these segments; and 3) potential from Latin American markets which are major producers of copper ore. Hence, AIA added 31% capacity in FY16, despite slower volumes currently. Further, they are targeting strong market share gains and ~80% capacity utilisation by FY19-20. Concerns remain on margins led by aggressive pricing. However, volume gains will remain sticky. We maintain ‘HOLD’ on slower volumes in short term and margin pressures. However we remain structurally positive in the long term with scope to raise our conservative 53% capacity utilisation estimate for FY18. We like AIA’s aggressive capacity expansion strategy to capture market share and reap benefits of strong potential in mining segment. However, we believe margin pressure will remain an overhang on the stock. At 20x FY18E, we maintain ‘HOLD’.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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