Anand Rathi Recommends Buying This Industrial Stock For 10% Potential Gains

The reputed brokerage firm, Anand Rathi has suggested buying the stocks of AIA Engineering Ltd for a 10% potential upside. The brokerage has set a target price of Rs 20,21.

Stock Outlook

The Current Market Price (CMP) of the stock is Rs 2038.95. It was opened at Rs 2,056.10. With the given target price and the CMP, the stock has the potential to gain 10%. It touched the 52 week low at Rs 1,475.05 this year on March 7, 2022. On the other hand, it touched the 52 week high at Rs 2,222 on July 07, 2021. The stock, in the last one year, has gained. Also, in the last one week, it gained up to 14%.

Better non-mining volumes

Anand Rathi in its latest report has said, "Despite a challenging FY22, AIA Engineering sold a further 30,000 tons to new customers and by increasing the share in existing ones. On passing on higher costs, Q4 FY22 blended realisation was up 38.2% y/y, 3.2% q/q."

According to the brokerage, "Q4 sales were 72,976 tons (ARe: 65,986 tons), down 8% y/y, bruised by lost volumes in Canada and South Africa, and higher freight costs. Mining volumes were down ~10.6% y/y to 44,395 tons. Non-mining volumes (though better) were also down, ~3.9% y/y, to 28,581 tons. Management guided to 30,000-40,000 tons of additional sales in FY23, supported by adjacencies from the mill-lining solutions."

Costs passed on led to higher sales realisations

Realisation/kg rose from ~Rs107 a year ago to ~Rs148 on higher costs (raw material, freight) passed on to customers. Though commodity prices are better as miners seek to increase throughput, higher freight costs are curbing volumes in some regions since the conversion to grinding media becomes unviable for customers there. AIA Engineering has guided to maintaining 20-21% margins in FY23.

Buy for a target price of Rs 2,241

"Short-term uncertainties persist, but AIAE is likely to benefit in the medium to longer-term from more mining in various regions, globally deeper penetration and a renewed capex cycle. We expect ~8%/~15% revenue/PAT CAGRs over FY22-24. The stock trades at an attractive 27x/22x FY23e/ FY24e P/E. We maintain our Buy on it with a TP of Rs2,241 (26x FY24e)," the brokerage has said.

According to the brokerage, the risks are Adverse currency movements and fluctuating raw-material prices.

About The Company - AIA Engineering Ltd.

AIA Engineering Ltd,  a certified ISO 9001 company, established in 1979 at Ahmedabad, India. The company is engaged in designing, developing, manufacturing and installation of abrasion and corrosion-resistant castings. It is specialises in the design, development, manufacture, installation and servicing of high chromium wear, corrosion and abrasion resistant castings used in the cement, mining and thermal power generation industries. It's the Second Largest Hi-Chrome casting producer in the world. The company has 11 subsidiaries in countries including India, UAE, UK, USA, etc,

 

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decisions.