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AIA Engg. (AIAE) - Qtr. Update - Dtd. - February 11, 2013




Axis Capital Limited


11 Feb 2013





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AIA’s Q3FY13 EBITDA margin at 20% came in as a surprise (our est. of 15%) led by (1) better product mix and (2) renewal of hedges (USD/INR of 52.50 vs. 50.70 earlier). The company guided for similar margin in Q4FY13. Revenue at Rs 4.2 bn (up 20% YoY) was largely in line with our expectation. A higher tax rate caused PAT to increase by a mere 6% to Rs 531 mn in Q3FY13. We believe AIA will continue to post 15% CAGR for the next few years driven by mining volumes. Sustained improvement in margin led by price increases with customers would be the key trigger for the stock. We introduce FY15 estimates and roll over our TP to FY15E EPS. Our revised TP stands at Rs 382 (14x FY15E EPS) vs. Rs 347 earlier. Upgrade to BUY given 24% upside from CMP of Rs 309. The stock trades at 13x FY14E EPS of Rs 24 and 11x FY15E EPS of Rs 27. In Q3FY13, AIA produced its highest ever quarterly volumes of mill internals – 42,800 MT. However, sale for the quarter stood at 38,000 MT (34,700 MT in Q3FY12). Realization for the quarter increased to Rs 106/Kg vs. Rs 98/Kg last year. Management continues to guide for volumes upwards of 160,000 MT in FY13 and 180-190,000 MT in FY14 with higher proportion of sales from mining segment. Margin guidance is 20% for FY14. Regards, Kashyap Pujara (ED – Midcaps) Institutional Equity Research Axis Capital Limited Tel: +91 22 4325 1146 Punit Chokhani (Asst VP – Midcaps) Institutional Equity Research Axis Capital Limited Tel: +91 22 4325 1130

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