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  • CMP : 4,239.8 Chg : -50.70 (-1.18%)
  • Buying Range : 2900-2955
  • Target : 3,410.0 (16.48%)
  • Stoploss : 2,695.0
  • Target Period : 3 Month

30 May 2023

Secular uptrend to bolster...

AIAEngg

TECHNICAL_INFOGRAPHIC_1
Technical Outlook
The capital goods sector has been one of the key outperformers of CY22 and is seen extending its up move after higher base formation in the first four months of CY23. Within the sector, we remain constructive on AIA Engineering as it remains in strong up trend and is at the cusp of generating a breakout above last five months consolidation (2988-2665) signalling resumption of up move

Structurally, as per change of polarity concept stock rebounded in Jan23 after retesting the multiyear trendline breakout area placed around ₹ 2400-2500 levels, highlighting strength that augurs well for next leg of up move

The stock, in the smaller time frame, has witnessed a faster retracement as it retraced its five weeks decline (₹2988-2665) in just three weeks signalling end of corrective phase
 
We expect the stock to maintain positive bias and head towards ₹ 3410 levels in the coming months being the 123.6% extension of the Jan-Apr 2023 up move (₹2384-2988) as projected from the low of May23 (₹2665)

Fundamental Outlook

AIA Engineering is India’s largest manufacturer and supplier of high chrome wear, corrosion and abrasion resistant castings used in cement, mining and thermal power plants (or mills). Products include tube mill internals (grinding media, shell liners, diaphragm), HRCS castings & crusher parts for cement, mining and power. The company is the second largest hi-chrome producer in the world.
 
AIA Engineering reported Q4FY23 consolidated revenues at ₹ 1,273.6 crore (slightly below our estimate of ₹ 1,340.6 crore), up 16.5% YoY. In FY23, consolidated revenues came in at ₹ 4,908.8 crore, up 37.6% YoY. In Q4FY23 absolute EBITDA came in at ₹ 315.7 crore, up 39.8% YoY. In Q4FY23, EBITDA margins expanded 413 bps YoY to 24.8% and gross margins came in at 54.6%. In FY23, EBITDA came in at ₹ 1240 crore and grew 72.1% with margins of 25.6% vs. 20.5% in FY22. AIA reported Q4FY23 PAT at ₹ 267.7 crore (in line with estimate of ₹ 270.8 crore), up 38%YoY supported by other income. In FY23, PAT came in at ₹ 1056.5 crore, up 70.5% on a YoY basis
 
In Q4FY23, sales volumes remain flat on a YoY basis at 73,505 tonnes while for FY23 it came in at 2,91,342 tonnes, which grew 11.9% YoY. Mining segment volumes increased 8.7% YoY to 44,284 tonnes in Q4FY23 and 1,92,352 tonnes in FY23, which grew 12.6%. For cement & others segment, volumes de-grew 11.6% YoY to 25,256 tonnes in Q4FY23 while in FY23 it came in at 98,990, up 10.4% YoY
 
AIA Engineering is restructuring their non-grinding media plant like, automation, upgradation, debottlenecking, increasing warehouses, extra moulding line etc. which will increase their non-grinding capacity by 20,000 tonnes by December 2023, additionally, the company is going for brownfield capacity expansion of grinding media that will add ~80,000 MT of capacity. Total capacity is expected to become 520000 TPA, it will incrementally increase in volumes and boost revenues. We value AIA at ₹ 3700 i.e. 32x P/E on FY25E EPS

Follow up summary of Gladiator Stocks

Other product open recommendations

Date Product Scrip Name Market Strategy RP Target Stoploss Time Frame
5/22/2023 12:00:00 AM Momentum Pick ACC Cash Buy 1810 1970 1740 30 Days
5/25/2023 12:00:00 AM Momentum Pick Tejas Network Cash Buy 666 712 628 14 Days
5/26/2023 12:00:00 AM Momentum Pick Coforge Cash Buy 4365 4630 4173 14 Days
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Source: Company, ICICI Direct Research

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INFOGRAPHIC

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