Kotak Securities has maintained 'Reduce' on AIA Engineering with target price of Rs 340 as against the current market price (CMP) of Rs 335 in its report dated Nov. 20, 2012.
AIA Engineering reported Q2FY13 results below our estimates on profitability front. Margins contracted YoY mainly due to adverse currency movement. Company continues to incur client acquisition cost in mining adding further pressure on the margin.
The operating margins stood at 13% in the quarter vis-a-vis 18.5% last year and 18.3% in Q1FY13 due to adverse currency movement incurring forex loss of close to Rs 130 million and increase in input prices. Company reported record volume sale in the quarter mainly driven by the mining segment.
The company reported EBIDTA at Rs 554 million in Q2FY13 vis-a-vis 642 million last year. Employee expense increased by 17% YoY to Rs 200 million in Q2FY13. Other expenses at Rs 1.8 billion include forex loss of Rs 120 million (Rs 300 million in 1HFY13) on hedging forward contracts. Company's order book stands at Rs 4.3 billion at the end of FY12. It remains positive on the company's business, however in view of rich valuations.
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