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ICICI Securities
AIA Engineering (Buy)
Target: ₹2,043
CMP: ₹1,759.70
AIA Engineering (AIAE) has finally reached a settlement with respect to the case filed against it by Magotteaux, for patent infringement relating to Sintercast products.
As per the full and final binding settlement: Magotteaux agrees never to litigate this issue before any other forum; all proceedings and claims, including related damages, are fully and finally settled; AIAE cannot claim the litigation expense from Magotteaux. Currently, the contribution from technology under consideration is less than 10 per cent of AIAE’s overall revenues and the company has moved to a more advanced technology.
The settled case under consideration was for claims of $60 million before the arbitration tribunal, ICC, dismissed it in August 19.
AIAE is currently in capex mode; hence overall RoCEs are low given the initially lower utilisation of new facilities. We however believe commencement of new capacities will support medium to long term growth from FY22 onwards.
Given the medium to long term growth drivers and continuation of mill liner capex plans despite the Covid-related slowdown, we maintain BUY on the stock with an unchanged target price of ₹2,043.
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