AIA Engineering Research Report By IDFC Securities

We expect AIA to continue making inroads into grinding media for mining, aided by its ‘total solutions’ approach and cost-effective products. Margins are likely to be in the range of 22-23% due to improvement in product mix and fewer free trials and discounts. However, we estimate a 150bp margin decline to 22.5% over FY14-16E due to ramp-up in capacity utilisation. Valuations of 19.7x FY16E earnings appear attractive given the oligopolistic nature of the industry and AIA’s long-term growth potential (16% earnings CAGR over FY14-17E). We reiterate our Outperformer rating on AIA.

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