ICICIdirect has selected AIA Engineering as techno-funda pick. It has recommended 'Buy' in the range of Rs 1,008-1,025 for target of Rs 1,210 with stop loss of Rs 908, for duration of 6 months. The broking house gave the following technical and fundamental outlook:
Technical Outlook
"The share price of AIA Engineering is seen resolving higher after a two-month long corrective phase signalling resumption of the next up leg within the larger bull trend and offers fresh entry opportunity with a favourable reward risk set-up from a medium term perspective.
The stock scaled to its life high of Rs 1,031 in September 2014 and thereafter entered a secondary corrective phase to work off the short term overbought conditions developed during the previous rally. The corrective decline saw the stock retrace its July-September rally precisely by 50% near the October 2014 lows of around Rs 866 levels. The placement of the rising trend line drawn by connecting weekly lows of May and July 2014 and rising 13-week EMA acted as a key support area for the stock. The stock witnessed basing formation around Rs 870 levels during October 2014 which highlighted steady accumulation by stronger hands
Considering the overall positive price structure, we believe the stock offers a good reward/risk set-up to ride the next up move. The price parity of the preceding rally as projected from the recent low of Rs 875 projects an upside target Rs1,203 levels over the medium-term.
Fundamental Outlook
Current global consumption of high chrome mill internals (HCMI) that is equally applied in the cement and mining space, is at ~6,00,000 tonnes per annum (TPA). With almost 80% penetration achieved for HCMI in cement space, mining segment provides the next leg up for HCMI players. It is expected that at least 1.2 MTPA mining segment volumes for mill internals can be converted from forged media into HCMI, going ahead. Hence, we believe this will create an opportunity 4x that of current HCMI consumption of 3,00,000 TPA for HCMI players in mining. Key focus areas in mining for AIA are gold and copper metal.
We believe AIA has made strong/profitable inroads into the global mining space. The same is reiterated by the massive capacity addition programme that it has undertaken and continued traction in the mining segment on a quarterly basis as even in Q2FY15, mining segment volumes grew over 40% YoY. Coupled with this, AIA has been consistently surprising on the positive side. Going ahead, we expect AIA to report a strong 17% revenue CAGR, backed by 24.1% volume CAGR, over FY14-17E coupled with 15% PAT CAGR. Hence, AIA has one of the best earnings profile in our coverage."
Shares of the company gained Rs 77.2, or 7.68%, to trade at Rs 1,082. The total volume of shares traded was 40,329 at the BSE (3.16 p.m., Wednesday).
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