Add AIA Engineering, target price Rs 2720: ICICI Securities

ICICI Securities has add call on AIA Engineering with a target price of Rs 2720. The current market price of AIA Engineering Ltd. is Rs 2630. Time period given by analyst is one year when AIA Engineering Ltd. price can reach defined target.

AIA Engineering Ltd., incorporated in the year 1991, is a Mid Cap company (having a market cap of Rs 22592.09 Crore) operating in Engineering sector.

AIA Engineering Ltd. key Products/Revenue Segments include Castings, Export Incentives and Other Operating Revenue for the year ending 31-Mar-2021.



Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 1100.34 Crore, down -2.80 % from last quarter Total Income of Rs 1132.08 Crore and up 41.17 % from last year same quarter Total Income of Rs 779.46 Crore. Company reported net profit after tax of Rs 191.47 Crore in latest quarter.

Investment Rationale
AIA Engineering’s (AIAE) consolidated revenues, EBITDA and PAT came in at Rs10.8bn, Rs2.5bn and Rs1.9bn (+46%, +44% and +28% YoY), respectively. Company reported 12.6% YoY growth in volumes to 67,898mtpa for the quarter led by 23.7% YoY rise in mining volumes, despite loss of volumes in Canada and South Africa. Gross margin contracted 530bps YoY due to continued supply chain challenges and high freight costs. However, with strong volume growth coupled with the company’s ability to partially pass on incremental costs, EBITDA margin contraction was limited to 34bps YoY to ~23%. Net realisation grew 30% YoY at Rs159/kg. With easing travel restrictions and mill liner capacity addition likely in Q2FY23, it expects volumes to pick up in FY23E. Maintain ADD with a revised target price of Rs2,720 (previously: Rs2,142).

Promoter/FII Holdings
Promoters held 58.47 per cent stake in the company as of 30-Jun-2022, while FIIs owned 18.13 per cent, DIIs 20.37 per cent.