Result Update: AIA Engineering Ltd - SELL - TP Rs.1700 - Kotak

AIA reported Q1FY19 revenues in line with our estimate driven by the mining division. Mining volumes are expected to remain strong on back of new market creation and improved realizations from existing clients going ahead.

Key Highlights

- AIA reported net revenue at Rs 7.1 Bn (+25.5% y/y) driven by over 14.6% volume growth in mining division.

- Operating margin contracted to 21.8% in the quarter against 22.8% in Q1FY18 due to 38.1% y/y increase in raw material expense. However with improved volumes/pricing in mining division, margins are likely to recover in FY19/20.

Valuation & Outlook

- We believe that the growth in the mining division will last into 9MFY19/20 and AIA could maintain/expand margins going ahead. We tweak our FY19/20 estimates upwards to factor in improved traction in the mining business. We value AIA Engineering at PER 25x FY20 earnings and arrive at a revised target price of Rs 1700. Stock has moved up since our previous update and in view of the downside to our revised target price, we change recommendation to 'Sell' from 'Accumulate' earlier.

Shares of AIA ENGINEERING LTD. was last trading in BSE at Rs.1819.15 as compared to the previous close of Rs. 1776.1. The total number of shares traded during the day was 61787 in over 214 trades.

The stock hit an intraday high of Rs. 1843.9 and intraday low of 1805. The net turnover during the day was Rs. 112671056.

Source : Equity Bulls

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