Buy AIA Engineering; target of Rs 1788: Edelweiss
Edelweiss’ research report on AIA Engineering
We reiterate our positive stance on AIA Engineering (AIA) post our recent interaction with management led by: i) <15% penetration in mining market (addressable ~3mn MTPA) leading to 18-20% volume CAGR over FY18-20E; ii) high exposure to robust gold & copper mining segment (addressable ~1.2mn MTPA); iii) rising penetration in primary media (~40% of sales); and iv) enhanced R&D muscle via tie ups with research agencies.
AIA is well equipped to leverage anticipated volume recovery with capacity in place (current utilization at 65% and 29% increase in capacity over next 2 years). We estimate AIA to clock 24% PAT CAGR over FY18-20 led by improving volume visibility. We maintain ‘BUY’ with TP of INR1,788 (28x FY20E EPS). At CMP, the stock trades at 26.6x FY19E and 22.2x FY20E.
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