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Buy AIA Engineering Ltd For Target Rs.2,288 - Yes Securities
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Result Highlights
* Revenue increased marginally by 0.4% YoY at Rs8.6 bn. Mining volumes came in at 49,642 MT, de‐growth of 10% YoY and Cement & other utility volumes were at 29,735 MT, a growth of 10% YoY. The marketing efforts have been impacted as sales team could not travel due to COVID. The Company expects mining and cement industries to pick up which would increase demand for its projects.
* EBITDA Margin came off by 188 bps to 19.7%. The margins were impacted due to increase in input costs and the Company expects to pass on the increase in coming months to the end customers.
* Mill Liner Project: The company is in midst of setting up a manufacturing plant of Mill Liners with a capacity of 50,000MT with an estimated capex of Rs2.5bn and it is expected to be commissioned in H2 2021. Post this expansion, total installed capacity will be 4,40,000 TPA. The Present Installed Capacity is 3,90,000 TPA. Kerala GIDC Project: The company has paused its last phase of Grinding Media expansion of 50,000 Mt as of now
* PAT de‐grew by 18.4% yoy to Rs1.3bn. Lower other income was offset by the decline in depreciation costs. Order book as of 1st April 2021 was Rs6.2 bn. Capex incurred for FY21 is Rs 1.18 bn. FY22 Capex pegged at Rs.2.1 bn.
* Volumes in Canada has been hampered (10% of volumes for AIAE) with the levy of Interim duty of 32.2% for imports of grinding media from India. The Company expects final adjudication on this matter by August 2021.
Our view:
The Company’s performance has been robust during the quarter in terms of volumes from the mining segment. With the second wave of COVID, there are near term challenges as marketing team is unable to travel and volumes may get impacted during H1 FY22. The margins also may be under little pressure with the increase in costs as Company may not be able to pass on entire cost increase to customers. We have marginally cut our FY22e/FY23e estimates to factor in the impact of COVID related impact on volumes and higher input costs. We retain our BUY rating on the stock for target price of Rs2288/share (30x FY23E EPS).
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