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Edelweiss Securities
AIA Engineering (Hold)
Target: ₹2,002
CMP: ₹1,802.8
We recently interacted with Kunal Shah, Executive Director of AIA. They key highlights are: volume loss owing to competition concerns in Canada and South Africa would be mitigated by other geographies, gold and copper remain a big part of the strategy with further potential improvement in demand, and mill liners’ capacity is expected to be commissioned by end-FY22 and ramp up over FY23. Recouping of volumes is likely to remain gradual as shipping costs remain elevated. While volume loss due to duties remains exacerbated over the near term, recoup could be stretched as volume conversion takes time.
Over the long term, demand from gold and copper remains robust with the higher requirement in renewables, EVs and smartphones, while gold remains the only proxy to the US dollar. Thus, metals are anticipated to remain in a structural bull run. AIA offers greater gold/copper recovery benefits to these mills via down-process.
With the integration of mill linings into its product portfolio, AIA has positioned itself as a comprehensive solutions provider. Given robust commodities prices, the opportunity for AIA continues to improve; however, high shipping costs and import duties in a few countries somewhat dampen near-term prospects despite the company’s solid offering.
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