INSUBCONTINENT EXCLUSIVE:
IIFL has given an 'add' recommendation on AIA Engineering (AIAE) with a target price of Rs 1,811.
Shares of AIA Engineering traded at Rs
1,746.65 around 2:30 pm on 26 June, 2019
The brokerage has set a one-year horizon for the stock to hit the target price
India’s exports of cast grinding media registered 12 per cent CAFR over 2015-18, which is largely in line with AIAE’s volume growth
This was largely driven by increased volumes exported to countries such as Australia, Ghana, USA and Tanzania
Improved consumption of cast media in the mining industry coupled with increased penetration by AIAE in key geographies also contributed to
this growth.
In the mining segment, AIAE’s focus has been to target ores of iron, copper, gold and platinum, for its chrome cast media
Over the past four years, share of imports from India in total imports grew in the key mining geographies of Australia, USA and Ghana
South Africa (the largest market for India exports) also witnessed growth, at 10 per cent CAGR over 2015-18, even as market share remained
stable, at over 95 per cent
At the same time, share of imports from India declined in Russia and Brazil, due to rise in competition from China and Chile,
respectively.
AIAE is in the process of expanding its capacity, from 340kt to 490kt over FY20-21ii
AIAE would focus on increasing market share in the key mining regions of Australia, USA, Canada and Africa
Simultaneously, the company’s announced focus on market share gains means that an aggressive pricing strategy should help regain market
share in other geographies
The ongoing shift from forged grinding media to chrome cast media, given gains on metal recovery from ore, lower re-agent requirement would
also aid volumes against forged players.
Key argument for AIAE’s volume growth has been the gradual shift of preference from forged
grinding media to high chrome cast grinding media in the mining segment
AIAE’s target ores include iron ore, copper, gold and platinum in the mining segment, with its geographical focus being top mining
countries such as Australia, South Africa, Canada and Zambia.