Recently, in Apr’14 we shared our findings on AIA Engineering (NSE Code – AIAENG) which is India’s leading and world’s second largest manufacturer of High Chrome mill internals (HCMI). The stock was recommended to Alpha and Alpha plus members in Apr 2014 at around levels of 565-576 (CMP – 940).
Summary of our findings on AIA Engineering:
- AIA manufactures HCMI which is largely an oligopolistic industry.
- AIA is the second largest company in the HCMI industry and is aiming to be the largest with 2.2x capacity expansion from FY 13 to FY 16.
- HCMI accounts for only about 20% of the overall grinding media requirement and this is despite their cost and efficiency benefits over conventional forged media.
- Mining industry is going through a phase of conversion in which ~1.2-1.5 MTPA grinding media requirement is expected to convert from conventional forged media to HCMI and thus HCMI players like AIA and Magotteaux will be key beneficiaries.
- The above mentioned conversion is likely to create an opportunity 4x the current size of requirement in mining industry and thus very good potential for continuous volume growth over the next few years.
- AIA has significant cost advantages over Magotteaux while the product and service quality is at par with Magotteaux, thus AIA is likely to benefit both from market share gains and overall increase in opportunity size.
- Strong and consistent operating performance of AIA in terms of growth, margins, return on equity, cash flow generation.
- Debt free with surplus cash to the tune of ~8% of the current market cap.
- Experienced promoters with their interests directly aligned with those of minority shareholders.
Detailed note on AIA Engineering can be downloaded here: AIA Engineering Ltd (NSE Code – AIAENG) – Apr’14 Katalyst Wealth Alpha Recommendation from Katalyst Wealth
Disclosure: I have invested in AIA Engineering and the findings have been shared with Alpha and Alpha + members as well. This report is being shared only for the purpose of information; do not construe the same as investment advice. In case you invest in AIA Engineering, please carry out your own due diligence.
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