Techno Funda Pick

S i
Scrip

I Di t C
I-Direct
Code
d

AIA Engineering

A ti
Action

AIAENG

Buy in the range of 1210-1240

Time Frame: 6 Months

R
Research
h Analysts
A l
Dharmesh Shah
Chirag Shah

dharmesh.shah@icicisecurities.com
shah.chirag@icicisecurities.com

November 25, 2016

T
Target
t

U id
Upside

1470.00

20%

Techno Funda Pick: AIA Engineering (AIAENG)

CMP | 1240.00
CMP:
1240 00

B i Range:
Buying
R
| 1210-1240
1210 1240

Stock Data
1210-1240

Price Target

1470

52 Week High

1357

52 Week Low

701.9

50 days EMA

1233

200 days EMA

1105

52 Week EMA

1088

*Recommendation given on i-click to gain on October

03, 2016
0 6 at 11:400 hrss

Stock price vs. BSE 200

3,800

1,400

3,600

1,200

3,400

1,000

3,200
,
3,000

600

2,800

Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16

800

AIA Engg

BSE 200

Price performance in last three years

126%

130%
-33%

21%

46%

2012

2013
Year

-18%

-70%
2011

T
Target:
t | 1470.00
1470 00

U id 20%
Upside:

Key technical observations

Recommended Price

30%

Time Frame: 6 Months

2014

2015

Source: Bloomberg, BSE, ICICIdirect.com Research

The share price of AIA Engineering is witnessing bullish consolidation just below its 2015 life-time highs around
| 1364 region. We believe the stock is undergoing a higher base building process that will act as a launchpad for the
thrust past the previous life-time highs, going forward, and provides a good entry opportunity for medium term
investors to ride the next up move within the structural uptrend.
Faster retracement of 2015 correction reinstates bullish momentum
The stock entered into a secondary corrective phase after hitting its life-time high of | 1364 in March 2015 along with
the corrective phase on benchmark indices. The price wise correction over the subsequent 12 months anchored
precisely at 61.8% retracement of the 2013-15 multi-fold rally (| 305 to | 1364) placed around | 700 region. The stock
attracted strong demand at the golden Fibonacci ratio of major bull run and embarked upon a strong up move that
resulted in a faster retracement of the entire corrective decline. The stock almost reversed its 12 month decline from
| 1364 to | 701 in eight months. Faster retracement of the corrective decline highlights the overall bullish price
structure and signals resumption of the upward momentum after conclusion of the corrective phase.
Consolidation at lower band of Rising Channel provides fresh entry opportunity
The entire up move since February 2016 bottom has occurred in a well defined rising channel highlighting a
structured up move and persistent demand at elevated levels. After apprehending its 2015 life-time high in October
the stock witnessed a gradual pullback and is seen consolidating precisely at the lower band of the medium term
rising over the last three weeks near |1180 region.
region The rising of 21 week EMA that has acted as strong intermediate
support during entire up move since February 2016 is also placed around |1180 region. We believe the stock is
attractively poised after the recent cool off and provides fresh entry opportunity with a favourable reward/risk set up
to ride the next up move to challenge the upper band of the medium term rising channel placed around |1535 region
The 61.8% Fibonacci retracement of the last rising segment (|914 to |1357) placed around 1090 region which also
coincides with the 200 day EMA currently placed near 1100 region will act as a strong support base for the stock
going forward.
Moment m indicators
Momentum
indicato s validate
alidate underlying
nde l ing positive
positi e trend
t end
The weekly stochastic is seen rebounding from the oversold reading of 20 and has generated a positive crossover
above its three period average. Prices are attracting supportive efforts at the lower boundary of the medium term
rising channel. It suggests build up of positive momentum and augurs well for the stock going forward.
Conclusion
Based on the aforementioned technical observations, we believe the stock is attractively poised at lower band of
medium term up
p trending
g channel and p
provides a g
good entry
y opportunity
pp
y for medium term investors to ride the next
up move. We expect the stock to embark upon its next up move and head towards the upper boundary of the rising
channel placed around |1535 levels over the medium term.

Techno Funda Pick: AIA Engineering (AIAENG) Weekly Bar Chart

Upper band of channel @ 1535

1365

1357

21 week EMA

Research Analyst
Dharmesh Shah
dharmesh.shah@icicisecurities.com

Faster retracement
in 8 months
12 month fall

Chirag Shah
shah.chirag@icicisecurities.com

2015 correction anchored at the 61.8% retracement of

the 2013-2015 bull run placed around |700 levels
Rising volumes at lower band of channel signal accumulation by stronger hands

Positive crossover
on stochastic

Source: Bloomberg, ICICIdirect.com Research

Techno Funda Pick: AIA Engineering (AIAENG)

Fundamental View

Stock Data
Particular
Market Capitalization
Total Debt (FY16)
Cash and Investments (FY16)
EV
52 week H/L
Equity capital
Face value

Amount
| 11601.4 Crore
|125 crore
| 890 crore
|8129
| 1082/701
| 18.9 Crore
|2

Key Metrics
P/E
Target P/E
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)

FY15
28
32.0
5.6
20.0
23
22.5

FY16
27.8
31.6
17.5
4.9
17.5
21.0

FY17E
27.4
31.2
17.3
4.3
15.7
18.1

FY18E
23.8
27.1
15.0
3.8
15.9
18.3

Financial Highlights
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)

FY15
2,183.6
549.4
413 2
413.2
43.8

FY16
2,100.4
609.3
417 8
417.8
44.3

FY17E
2,157.6
612.0
423 2
423.2
44.9

FY18E
2,515.3
697.3
487 7
487.7
51.7

Q2FY17 volume up 21% YoY, likely to sustain in H2FY17

Volume growth for Q2FY17 was at 51969 tonnes, up 21% YoY, compared to our estimate of 49940 tonnes. Coupled
with this, mining segment volumes made a smart comeback with 30.78% YoY and 9.2% QoQ growth at 31858
tonnes while the cement and utility segment posted muted volume growth at 20111 tonnes. The management has
guided for 125000 tonnes from FY16-19E on the back of new capex and global commodity situation stabilising
especially in countries like Brazil and South Africa. We have built in volumes of 209940 tonnes and 243531 tonnes in
FY17E and FY18E, respectively, implying volume CAGR of 14.5% in FY16-18E.
Capex on track as phase II expansion by FY18
AIA has already commissioned Phase 1 of the capex programme, which has taken the capacity to 340000 tonnes.
Phase II may get commissioned in Q3FY18, adding incremental 1000000 tonnes and taking total capacity to 440000
tonnes by FY18E.
FY18E The capex of Phase II is pegged at | 350 crore out of which | 170 crore will be spent in FY17E.
FY17E
EBITDA margins to moderate from high levels
EBITDA margins would decline to 27.7% in FY18E from 29% in FY16 and 28.4% in FY17E over the next few years
as AIA, in the transition period, will aggressively add new customers in the global mining arena and adopt a level
pricing strategy to market new capacity.
Volumes to get stronger in H2FY17-FY18E
Strong Q2FY17 volume growth of 21% and a strong outlook reiterate our faith in its growth trajectory, going
ahead. We expect volume CAGR at 14.5% in FY16-18E. However, at the same time, aggressive pricing strategy to
market new capacity will lower realisation and, hence, margins. This is reflected in the 9%, 8% revenue, PAT CAGR,
respectively, for AIA in the same period. However, at the same time, AIA is a dominant player in a global oligopoly
market with a strong balance sheet (cash of | 1171 crore as of Q2FY17), which will easily allow its aspiration to fund
the capex and become No. 1 player in the global HCMI segment. Given strong prospects, we are positive on the
stock and recommend that stock can be a core portfolio holding from a two to three year perspective.

Source: Company, ICICIdriect.com Research

Strategy Follow up

Summary Performance
S
P f
-R
Recommendations
d ti
till date
d t
Total Recommendations
79
Closed Recommendations
79
Positive Recommendations
62
Strike Rate
81%

Open Recommendations
O
R
d ti
Yield on Positive recommendations
Yield on Negative recommendations

0
18.0%
-8.0%

Notes

It is recommended to enter in a staggered manner within the prescribed range provided in

the report.
The recommendations are valid for six months and in case we intend to carry forward the
position, it will be communicated through separate mail.

Trading portfolio allocation

It is recommended to spread out the trading corpus in a proportionate manner between the
various technical research products
Please avoid allocating the entire trading corpus to a single stock or a single product
segment
Withi each p
Within
product
od ct seg
segment
e t it is advisable
ad isable to allocate eq
equal
al a
amount
o t to each
recommendation
For example: The Daily Calls product carries 3 to 4 intraday recommendations. It is
advisable to allocate equal amount to each recommendation

Recommended product wise trading portfolio allocation

Product

Allocations
Product wise Max allocation in
allocation
1 Stock

Return Objective
Number of Calls

Frontline Stocks Mid Cap Stocks

Duration

Daily Calls

8%

2-3%

3-4 Stocks

0.5-1%

2-3%

Intraday

Stocks on the Move

6%

3-5%

7-10 Per Months

7-10%

10-15%

3 Months

Weekly Calls

8%

3-5%

1-2 Stocks

5-7%

7-10%

1 Week

Weekly Technicals

8%

3-5%

1-2 Stocks

5-7%

7-10%

1 Week

Monthly Call

15%

5%

2-3 Stocks

7-10%

10-15%

1 Month

Monthly Technical

15%

2-4%

5-8 Stocks

7-10%

10-15%

1 Month

Techno Funda

15%

5-10%

1-2 Stocks

10% and above 15% and above

6 Months

Gladiator Stocks

15%

5 10%
5-10%

1 2 Stocks
1-2

15% and above 20% and above

6 Months

Cash

10%
100%

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor,
Floor Akruti Trade Centre,
Centre
Road No 7, MIDC
Andheri (East)
Mumbai 400 093
research@icicidirect.com

Disclaimer
ANALYST CERTIFICATION
We /I, Dharmesh Shah, Rashesh Shah Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views
expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our
compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.
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i interest
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f
foreign
i exchange
h
rates
t or any other
th reason.

Disclaimer
ICICI S
Securities
i i accepts no liliabilities
bili i whatsoever
h
ffor any lloss or d
damage off any ki
kind
d arising
i i out off the
h use off this
hi report. Past
P
performance
f
is
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necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before
investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not
predictions and may be subject to change without notice.
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