India Midcaps

RESULT UPDATE

AIA ENGINEERING
Volume surge to drive strong growth
India Equity Research| Miscellaneous

AIA Engineerings (AIA) 20% revenue (INR5.9bn) and 16% EBITDA EDELWEISS RATINGS
(INR1.7bn) growth surpassed our estimates by 10% and 12%, Absolute Rating BUY
respectively. Volumes jumped 28% YoY with mining volume surging 49% Investment Characteristics Growth
(31% in Q2FY17). Gross margin dropped 335bps YoY on account of surge
in ferrochrome prices. Management guided for continued strong volume
growth, with incremental volume of 120,000MT over 3 years (implying MARKET DATA (R: AIAE.BO, B: AIAE IN)
volume CAGR of ~20% over FY17-19E). On humungous opportunity in CMP : INR 1,414
gold and copper ore and primary grinding media, low current penetration Target Price : INR 1,723
of high chrome grinding media, expected mining volume CAGR of 31% 52-week range (INR) : 1,442 / 692
over FY17-19E, strong ex-cash RoCE of >45%, earnings CAGR of 16% and Share in issue (mn) : 94.3
huge cash balance entailing scope for increase in dividend payout M cap (INR bn/USD mn) : 133 / 1,992
(currently ~20%), we raise our target multiple to 25x FY19E (22x earlier). Avg. Daily Vol. BSE/NSE (000) : 56.0
We upgrade to BUY with a target price of INR1,723 (1224 earlier).
SHARE HOLDING PATTERN (%)
Mining drives robust volume growth Current Q2FY17 Q1FY17
Volume growth of 28.4% to 56,846MT saw AIA register highest volumes in a quarter. Promoters * 61.7 61.7 61.7
This was led by strong 49% growth in mining, which will contribute majority of MF's, FI's & BKs 5.3 5.4 5.2
incremental volumes for the year, as cement and utilities are expected to be flat. FII's 26.7 28.3 28.1
Cement and utilities volumes continued to lag at 4% YoY growth. Management guided Others 6.4 4.6 5.0
for incremental volume of 120,000MT over 3 years. Customer addition will drive * Promoters pledged shares : NIL
(% of share in issue)
volume growth, as current penetration of high chrome grinding media stands at mere
10-12%. Realisation dipped again (by 7%) this quarter to INR100,890/MT, which
PRICE PERFORMANCE (%)
management says is a sustainable level.
BSE Midcap Stock over
Stock
Index Index
Margins to be under pressure in near term
1 month 5.6 4.5 (1.1)
Gross margin fell 335bps YoY to 66.9% on surge in ferro chrome prices. Continuance of
3 months 7.0 15.9 8.8
high raw material prices will exert pressure on margins in near term as it will take a
12 months 38.8 86.3 47.6
couple of quarters to pass on the price hike. Lower realisations due to aggressive
customer acquisition will exert further pressure on margins. EBITDA margin fell 83bps
YoY and QoQ.

Outlook and valuations: Bright prospects; upgrade to BUY

Uptick in mining sector as commodity prices rise, and mere 10-12% penetration of high
chrome grinding media will drive 20% volume growth (FY17-19E). We have assumed
capacity utilisation of 71% in FY19E, entailing scope for further volume growth. At
CMP, the stock trades at 20.6x FY19E EPS. We upgrade to BUY, based on 25x FY19E.
Financials (INR mn)
Year to March Q3FY17 Q3FY16 % change Q2FY17 % change FY16 FY17E FY18E
Net rev. 5,901 4,931 19.7 5,295 11.4 20,984 22,581 26,683
EBITDA 1,728 1,485 16.4 1,594 8.4 6,114 6,596 7,585
Adj. profit 1,203 1,015 18.5 1,124 7.1 4,242 4,829 5,489 Shradha Sheth
Adj.Dil EPS (INR) 12.8 10.8 11.9 45.0 51.2 58.2 +91 22 6623 3308
shradha.sheth@edelweissfin.com
Diluted P/E (x) 31.5 27.7 24.4
EV/EBITDA (x) 20.5 18.7 16.0
February 14, 2017
ROAE (%) 19.4 19.5 19.0
Edelweiss Research is also available on www.edelresearch.com,
Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. Edelweiss Securities Limited
Miscellaneous

Q3FY17 conference call: Key highlights

Overall sales volume, at 56,846MT, jumped 28% YoY, continuing its strong growth
trajectory. This was AIAs best-ever quarter in terms of sales volume. Management is
targeting incremental volume growth of 120,000MT over next 3 years (i.e., an addition
of 40,000MT every year).

Volume guidance for FY17: Volumes growth is expected to continue to grow strongly in
Q4FY17 and AIA has guided for 210,000 tonnes for FY17E. Growth is expected to be
driven by mining segment, which is expected to close the year at 130,000MT, while
cement and utilities are expected to remain flat for the year.

Strong mining volumes: Mining volume for the quarter at 35,854MT was up a robust
41% YoY (13% QoQ). This is post reporting strong 31% YoY growth in Q2FY17. Rise in
sales volume was contributed primarily by addition of new customers as AIA looks at
increasing penetration of high chrome grinding media in the market. Acquisition of
customers is AIAs foremost objective, even if it is at the expense of lower realisations.

Cement and utility volumes were at 20,992MT, up 4% YoY. Sector outlook remains flat.
However, according to management, supplies of high chrome mill internals to Indian
thermal power plants may pick up if the user industry picks up.
Gross margin: Fell 335bps YoY and 536bps QoQ at 66.9% due to the spurt in raw
material (ferro chrome) prices during the quarter. Management has guided that
pressure on margins may sustain in near future if raw material prices remain at these
levels, since they will be able to pass on the price hike only after 3-6 months.

Average realisation stood at INR100,890/MT, down 7% YoY, but up 2% QoQ. This was in
line with the companys strategy of addition of new customers through aggressive
pricing. Management expects realisation to stabilise at these levels, i.e. at around
INR100,000/MT. Realisations are unlikely to go up going forward.

EBITDA grew 16% YoY, but EBITDA/MT declined 9% YoY to INR30,402/MT due to the
pressure on margins.

Order book as at Dec 31, 2016 stood at INR6.1bn (Sept 30, 2016 at INR8.4bn).

Gold and copper Key growth drivers: AIA anticipates strong volume growth in gold
and copper. Growth will be driven by conversion to chrome media, rather than growth
of ores. Penetration of high chrome media stands at mere 10-12% currently and
addition of new customers will push growth. Iron and platinum are also picking up.
However, management has guided that they are focusing on increasing penetration
across segments, and not in a particular geography or primary/secondary/tertiary
processing segments.
New capacity: Estimated capacity addition of 100,000MT in GIDC Kerala, Phase-II
green-field to be commissioned by October 2017 at total capex of INR3.5bn, taking
capacity to 440,000MT. Capacity of 50,000MT will be added in first phase, and the
remaining in FY18. According to management, this is an automated plant hence
employee costs are lower. Capex incurred during the quarter was INR215mn, while
expected capex for FY17 is INR1.64bn. Capex of INR3bn is expected to be incurred next
year.

Other income grew 21% YoY to INR223mn from INR185mn in Q3FY16 with underlying
INR182mn of treasury income.

2 Edelweiss Securities Limited

 AIA Engineering

Improving industry scenario

With improving prices of metals in past 6 months, AIA has been targeting metal groups of
gold and copper, which moved up 8% and 17%, respectively, in past 12 months. It is also
looking at improvement in the traditional ores of iron ore and platinum, leading to stability
for miners and acceleration of conversion process from traditional to ferro chrome grinding
media, in turn leading to improved growth outlook for AIA.

Chart 1: Copper: Prices surged 17% in a year Chart 2: Gold: 8% price hike in past year
8,800 2,000

1,800
7,600
(USD/unit)

(USD/unit)
1,600
6,400
1,400
5,200
1,200

4,000 1,000
Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17
Jul-12

Jul-13

Jul-14

Jul-15

Jul-16

Jul-12

Jul-13

Jul-14

Jul-15

Jul-16
Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17
Chart 3: Iron ore: Prices recovered 35% in QoQ Chart 4: Platinum: Price up 10% in January
180 1,800

150 1,600
(USD/unit)
(USD/unit)

120 1,400

90 1,200

60 1,000

30 800
Jul-12

Jul-13

Jul-14

Jul-15

Jul-16
Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17
Dec-11

Dec-12

Dec-13

Dec-14

Dec-15

Dec-16
Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Source: Bloomberg, Edelweiss research

3 Edelweiss Securities Limited

 Miscellaneous

Increasing raw material prices

Chart 5: Ferro chrome: Surged 55% QoQ Chart 6: Scrap steel: Price rise of 38% QoQ
120,000 400

106,000 350

(USD/tonne)
(INR/Tonne)

92,000 300

78,000 250

64,000 200

150
50,000

Oct-14

Oct-15

Oct-16
Apr-14

Apr-15

Apr-16
Jan-15

Jan-16

Jan-17
Jul-14

Jul-15

Jul-16
Apr-14

Apr-15

Apr-16
Jul-14

Jul-15

Jul-16
Oct-14

Oct-15

Oct-16
Jan-15

Jan-16

Jan-17
Source: Bloomberg, Edelweiss research

Q2FY17 conference call: Key highlights

Overall sales volume, at 51,969MT, jumped 21% YoY, continuing its growth trajectory.
However, this was on account of 14% decline in volumes in the base quarter. This was
AIAs second best quarter ever in terms of sales volume after Q4FY16. Management is
targeting incremental volume growth of 120,000MT over the course of 3 years (i.e., an
addition of 40,000MT every year).

Volume guidance for FY17: Volumes are expected to pick up from Q3FY17 and AIA has
guided for 205,000-210,000 tonnes for FY17E with higher revenue in H2FY17 at ~110K
tonnes versus 99.5K tonnes in H1), implying 13% YoY volume growth in H2FY17.

Strong mining volumes: Mining volume for the quarter at 31,858MT was up 31% YoY
(9% QoQ). This is post reporting strong 23% YoY growth in Q1FY17. But, growth was on
base of 28% decline in Q2FY16. Rise in sales volume was contributed primarily by
addition of new customers. Acquisition of customers is AIAs foremost objective, even if
it is at the expense of lower realisations.

Cement and utility volumes were at 20,111MT, up 9% YoY. Outlook on this sector
continues to remain flat. However, according to management, supplies of high chrome
mill internals to Indian thermal power plants, although flat as of now, are expected to
pick up from the current fiscal.

Strong gross margin expansion, but raw material prices on the rise: Gross margin has
expanded 495bps YoY to 72.3% due to a large dip in raw material prices and better
product mix. Raw material cost fell 8% YoY despite growth in revenue, making up just
28% of revenue compared to 33% in Q2FY16. However, this margin expansion may not
be sustainable due to rising ferro chrome prices (up 19%QoQ) and lower expected
realisation due to aggressive pricing.

Average realisation stood at INR99,056/MT, down 11% YoY and 3% QoQ. This is after
posting 14% YoY drop in realisation in Q1FY17. This was in line with the companys
strategy of addition of new customers through aggressive pricing. Management expects

4 Edelweiss Securities Limited

 AIA Engineering

realisation to stabilise at around INR100,000/MT and dilution through aggressive

pricing may be offset by price hikes (due to increasing commodity prices) and currency
movement.

EBITDA grew 11% YoY, but EBITDA/MT declined 8% YoY to INR30,681/MT due to lower
realisation.

Order book as at Sept 30 stood at INR 8.4bn (June 30: INR6.9bn).

Gold and copper Key growth drivers: AIA anticipates strong volume growth in gold
and copper. Growth will be driven by conversion to chrome media, rather than growth
of ores. Penetration of high chrome media is less than 10% currently and addition of
new customers will push growth. Iron and platinum are also picking up with
improvement in the Chinese economy. Prices of iron ore have jumped 85% in 10
months.

Depreciation was up just 6% since Moraiya plant has been fully depreciated, plus
previously goodwill was amortised which will not be amortised as per IND-AS, leading
to INR15mn benefit.

New capacity: Estimated capacity addition of 100,000MT in GIDC Kerala, Phase-II

greenfield is expected to be completed by 2018 at INR3.5bn Capex, taking the capacity
to 440,000MT. According to management, this is an automated plant hence employee
costs are lower. Capex incurred during the quarter was INR195mn, while expected
capex for FY17 is INR1.64bn.

Other income grew 36% YoY to INR268mn from INR198mn in Q2FY16 with underlying
INR190mn of treasury income and balance being DEPB benefits.

Net cash improved further to INR11bn from INR9.9bn in Q1FY17.

5 Edelweiss Securities Limited

 Miscellaneous

Financial snapshot (INR mn)

Year to March Q3FY17 Q3FY16 % change Q2FY17 % change YTD17 FY17E FY18E
Net revenues 5,901 4,931 19.7 5,295 11.4 16,200 22,581 26,683
Raw material 1,950 1,465 33.2 1,466 33.0 4,991 7,392 9,060
Employee expenses 271 265 2.2 267 1.5 795 1,063 1,190
Other expenses 1,951 1,715 13.7 1,967 (0.8) 5,621 7,529 8,847
Total expenditure 4,172 3,446 21.1 3,700 12.8 11,407 15,985 19,098
EBITDA 1,728 1,485 16.4 1,594 8.4 4,792 6,596 7,585
Depreciation 170 147 15.7 170 (0.2) 515 706 837
EBIT 1,558 1,338 16.4 1,424 9.4 4,277 5,890 6,748
Other income 223 185 20.8 268 (16.9) 749 1,009 1,089
Interest 9 8 13.5 10 (16.0) 31 51 53
Add: Prior period items
Add: Exceptional items
Profit before tax 1,773 1,515 17.0 1,682 5.4 4,995 6,848 7,784
Provision for taxes 568 499 13.7 558 1.8 1,576 2,020 2,296
Minority interest 2 1 141.4 1 74.5 3 (1) (1)
Associate profit share
Reported net profit 1,203 1,015 18.5 1,124 7.1 3,417 4,829 5,489
Adjusted Profit 1,203 1,015 18.5 1,124 7.1 3,417 4,829 5,489
Diluted shares (mn) 94 94 94 94 94 94
Adjusted Diluted EPS 12.8 10.8 18.5 11.9 7.1 36.2 51.2 58.2
Diluted P/E (x) - - - 62.9 27.7 24.4
EV/EBITDA (x) - - - - 18.7 16.0
ROAE (%) - - - 16.0 19.5 19.0

As % of net revenues
Raw material 33.1 29.7 27.7 30.8 32.7 34.0
Employee cost 4.6 5.4 5.0 4.9 4.7 4.5
Other expenditure 33.1 34.8 37.1 34.7 33.3 33.2
EBITDA 29.3 30.1 30.1 29.6 29.2 28.4
Reported net profit 20.4 20.6 21.2 21.1 21.4 20.6
Tax rate 32.0 33.0 33.2 31.5 29.5 29.5

Change in Estimates
FY17E FY18E
New Old % change New Old % change Comments
Net Revenue 22,581 22,306 1.2 26,683 26,484 0.8 Driven by higher volumes
EBITDA 6,596 6,194 6.5 7,585 6,964 8.9
EBITDA Margin 29.2 27.8 28.4 26.3 Margin revised as per performance
Adjusted Profit 4,829 4,572 5.6 5,489 5,247 4.6
After Tax
Net Profit Margin 21.4 20.5 20.6 19.8
Capex 2,509 1,869 34.2 2,074 2,074 0.0

6 Edelweiss Securities Limited

 AIA Engineering

Company Description
AIA, an ISO 9000 certified company, is a niche player in the value-added, impact abrasion,
and corrosion resistant high chrome metallurgy segment with current capacity of 340,000
mtpa. It manufacturers products like grinding media, liners, diaphragms, and vertical mill
parts (collectively referred to as mill internals) in high chrome metallurgy. These products
find application in crushing and grinding operations in cement, thermal power and mining
plants, where they are used to crush/grind clinker, coal and mineral ore, respectively. High
chrome metallurgy offers lower wear rate than the conventionally used parts of manganese
steel, nihard iron, hyper steel, and forgings. The company offers complete solutions in
grinding to optimise the productivity of grinding mills.

Investment Theme
We like AIAs business model as the lions share of mill internals demand arises from the
mining industry, followed by cement. The annual global replacement demand for these two
sectors is estimated at ~2.5 mn MT, with demand from the mining sector at ~1.5-2 mn MT.
However, 88-90% of the mining demand is currently being serviced by conventional and
forged mill internals. With the industry moving from cost of parts to total cost of ownership,
there is a huge opportunity for AIA to convert users to high chrome mill internals. Also,
while ferro chrome grinding media results in 3-4% net production cost savings, the shift
from forged grinding media to ferro chrome does not involve any upfront capital cost.

Key Risks
Venture into global mining
AIA entered into the global mining industry and further increasing its capacity to cater the
global mining industry which is mainly served by traditional players. This is an unchartered
territory for the company.

Fluctuating raw material prices

Even though price escalation clauses have been built into customer contracts, any
substantial increase in the raw material prices can adversely affect AIAs performance. In
addition, shortage of domestic/imported raw materials may adversely affect its growth
prospects.

Dependence on end-user industries

AIA is dependent on growth prospects of cement, mining, and power sectors for product
sales. Any slowdown in these industries may result in margin contraction or restrict volume
growth.

7 Edelweiss Securities Limited

 Miscellaneous

Financial Statements
Key Assumptions Income statement (INR mn)
Year to March FY16 FY17E FY18E FY19E Year to March FY16 FY17E FY18E FY19E
Macro Income from operations 20,984 22,581 26,683 32,188
GDP(Y-o-Y %) 7.2 6.5 7.1 7.7 Direct costs 7,150 7,392 9,060 11,227
Inflation (Avg) 4.9 4.8 5.0 5.2 Employee costs 1,022 1,063 1,190 1,333
Repo rate (exit rate) 6.8 6.3 6.3 6.3 Other Expenses 6,699 7,529 8,847 10,518
USD/INR (Avg) 65.0 67.5 69.0 69.0 Total operating expenses 14,870 15,985 19,098 23,079
Company EBITDA 6,114 6,596 7,585 9,108
Cement 72,024.0 72,086.4 72,155.0 72,230.5 Depreciation 670 706 837 922
Utilities 13,080.0 13,341.6 13,741.8 14,154.1 EBIT 5,444 5,890 6,748 8,186
Mining 100,684.0 130,889.2 172,773.7 226,333.6 Add: Other income 329.25 1,009.14 1,089.32 1,086.39
Total Quantity 185,788 216,317 258,671 312,718 Less: Interest Expense 49 51 53 53
Cement (y-o-y) 5.0 0.1 0.1 0.1 Add: Exceptional items 262 - - -
Utilities (y-o-y) 9.0 2.0 3.0 3.0 Profit Before Tax 5,986 6,848 7,784 9,220
Mining (y-o-y) (5.1) 30.0 32.0 31.0 Less: Provision for Tax 1,745 2,020 2,296 2,720
Average realisation KG 110.5 101.7 100.7 100.7 Less: Minority Interest (1) (1) (1) (1)
Cost assumptions Reported Profit 4,242 4,829 5,489 6,501
Raw Material (% net rev) 34.1 32.7 34.0 34.9 Adjusted Profit 4,242 4,829 5,489 6,501
Employee cost (% of rev) 4.9 4.7 4.5 4.1 Shares o /s (mn) 94 94 94 94
Power Cost % sales 10.0 11.1 11.5 11.7 Adjusted Basic EPS 45.0 51.2 58.2 68.9
Sell. & admin exp % Sale 8.6 8.2 7.1 6.0 Diluted shares o/s (mn) 94 94 94 94
Avg. Interest rate (%) 3.9 3.4 3.5 3.5 Adjusted Diluted EPS 45.0 51.2 58.2 68.9
Depreciation rate (%) 7.3 6.5 6.6 6.5 Adjusted Cash EPS 53.0 58.7 67.1 78.7
Tax rate (%) 29.2 29.5 29.5 29.5 Dividend per share (DPS) 18.0 9.0 9.9 10.9
Dividend payout (%) 46.6 20.5 19.8 18.4 Dividend Payout Ratio(%) 0.5 0.2 0.2 0.2
Capex (INR mn) (1,775) (2,509) (2,074) (1,074)
Debtor days 72 71 67 67 Common size metrics
Inventory days 217 191 171 167
Year to March FY16 FY17E FY18E FY19E
Payable days 56 54 54 54
Staff costs 4.9 4.7 4.5 4.1
Cash conversion cycle 233 208 184 180 Direct Cost 34.1 32.7 34.0 34.9
EBITDA margins 29.1 29.2 28.4 28.3
Net Profit margins 20.2 21.4 20.6 20.2

Growth ratios (%)

Year to March FY16 FY17E FY18E FY19E
Revenues (3.9) 7.6 18.2 20.6
EBITDA 4.5 7.9 15.0 20.1
Adjusted Profit (1.6) 13.8 13.7 18.4
EPS (1.6) 13.8 13.7 18.4

8 Edelweiss Securities Limited

 AIA Engineering

Balance sheet (INR mn) Cash flow metrics

As on 31st March FY16 FY17E FY18E FY19E Year to March FY16 FY17E FY18E FY19E
Share capital 189 189 189 189 Operating cash flow 5,470 5,566 4,952 5,626
Reserves & Surplus 22,638 26,474 30,874 36,177 Investing cash flow (4,013) 2,030 (1,074) (74)
Shareholders' funds 22,827 26,662 31,062 36,366 Financing cash flow (2,084) (986) (1,088) (1,197)
Minority Interest 76 76 76 76 Net cash Flow (627) 6,610 2,790 4,355
Short term borrowings 1,253 1,253 1,253 1,253 Capex (1,775) (2,509) (2,074) (1,074)
Long term borrowings 253 253 253 253 Dividend paid (1,978) (989) (1,088) (1,197)
Total Borrowings 1,506 1,506 1,506 1,506
Long Term Liabilities 86 86 86 86 Profitability and efficiency ratios
Deferred revenue 329 329 329 329 Year to March FY16 FY17E FY18E FY19E
Sources of funds 24,824 28,660 33,059 38,363 ROAE (%) 19.4 19.5 19.0 19.2
Gross Block 7,725 9,509 11,223 13,297 ROACE (%) 24.9 26.2 25.7 26.3
Capital work in progress 378 978 978 978 Inventory Days 217 191 171 167
Tangible assets 6,689 6,941 8,178 8,329 Debtors Days 72 71 67 67
Intangible Assets 21 217 217 217 Payable Days 56 54 54 54
Total net fixed assets 7,088 8,136 9,372 9,524 Cash Conversion Cycle 233 208 184 180
Cash and Equivalents 10,150 12,221 14,011 17,365 Fixed asset turnover (x) 3.4 3.3 3.4 3.8
Inventories 3,893 3,848 4,642 5,660 Gross Debt/EBITDA 0.2 0.2 0.2 0.2
Sundry Debtors 4,304 4,516 5,337 6,438 Gross Debt/Equity 0.1 0.1 - -
Loans & Advances 260 260 260 260
Other Current Assets 1,646 1,678 1,712 1,746 Operating ratios
Current Assets (ex cash) 10,103 10,302 11,950 14,103 Year to March FY16 FY17E FY18E FY19E
Trade payable 984 1,215 1,489 1,846 Total Asset Turnover 0.9 0.8 0.9 0.9
Other Current Liab 1,534 1,528 1,528 1,528 Fixed Asset Turnover 3.4 3.3 3.4 3.8
Total Current Liab 2,518 2,743 3,017 3,373 Equity Turnover 1.0 0.9 0.9 1.0
Net Curr Assets-ex cash 7,585 7,559 8,933 10,730
Uses of funds 24,824 28,660 33,059 38,363 Valuation parameters
BVPS (INR) 242.0 282.7 329.3 385.6 Year to March FY16 FY17E FY18E FY19E
Adj. Diluted EPS (INR) 45.0 51.2 58.2 68.9
Free cash flow (INR mn) Y-o-Y growth (%) (1.6) 13.8 13.7 18.4
Year to March FY16 FY17E FY18E FY19E Adjusted Cash EPS (INR) 53.0 58.7 67.1 78.7
Reported Profit 4,242 4,829 5,489 6,501 Diluted P/E (x) 31.4 27.6 24.3 20.5
Add: Depreciation 670 706 837 922 P/B (x) 5.8 5.0 4.3 3.7
Interest (Net of Tax) 33 34 35 35 EV / Sales (x) 6.0 5.5 4.6 3.7
Others (256) (35) (36) (36) EV / EBITDA (x) 20.4 18.6 15.9 12.9
Less: Changes in WC (781) (32) 1,374 1,797 Dividend Yield (%) 1.3 0.6 0.7 0.8
Operating cash flow 5,470 5,566 4,952 5,626
Less: Capex 1,775 2,509 2,074 1,074
Free Cash Flow 3,696 3,057 2,878 4,552

9 Edelweiss Securities Limited

 Miscellaneous

Additional Data
Directors Data
Mr. Rajendra S. Shah Chairman Independent - Non-Executive Mr. Bhadresh K. Shah Managing Director : Executive - Promoter
Mr. Sanjay S. Majmudar Independent Dr. S. Srikumar Non Independent - Non-Executive Director
Mr. Yashwant M. Patel Whole-time Director Mr. Rajan Ramkrishna Harivallabhdas Whole-time Director
Mrs. Khushali S. Solanki Whole-time Director Mrs. Bhumika S. Shodhan Whole-time Director
Mr. Dileep C. Choksi Whole-time Director

Auditors - M/s.Talati & Talati

*as per last available data

Holding Top -10

Perc. Holding Perc. Holding
Pinebridge investments 5.8 Vanguard Group 1.0
Matthews international 4.5 Prudential ICICI Asset Management 0.9
Nalanda India Equity Fund 2.1 Goldman Sachs Group 0.8
Jwalamukhi Invt Holdings 1.7 Dimensional Fund Advisors 0.5
HDFC Asset Mgmt 1.5 Kotak Mahindra 0.5
*as per last available data

Bulk Deals
Data Acquired / Seller B/S Qty Traded Price

No Data Available
*as per last available data

Insider Trades
Reporting Data Acquired / Seller B/S Qty Traded

No Data Available
*as per last available data

10 Edelweiss Securities Limited

 AIA Engineering

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai 400 098.
Board: (91-22) 4009 4400, Email: research@edelweissfin.com

Manoj Bahety
Deputy Head Research
manoj.bahety@edelweissfin.com

Coverage group(s) of stocks by primary analyst(s): Miscellaneous

AIA Engineering, Apar Industries Ltd, Aarti Industries, Agro Tech Foods, Balkrishna Industries, CCL Products India, Essel Propack, Orient Refactories,
Supreme Industries, Solar Industries, SRF, Vesuvius India, VIP Industries
`
Recent Research
Date Company Title Price (INR) Recos
13-Feb-17 Balkrishna Volumes spurt; margins under 1,170 Buy
Industries pressure;
Result Update
07-Feb-17 Aarti Stable volume growth in 784 Buy
Industries challenging times;
Result Update
06-Feb-17 Essel Propack Demonetisation impacts India 248 Buy
performance; Result Update

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe Rating Interpretation

Buy Hold Reduce Total Rating Expected to

Rating Distribution* 161 67 11 240 Buy appreciate more than 15% over a 12-month period
* 1 stocks under review
Hold appreciate up to 15% over a 12-month period
> 50bn Between 10bn and 50 bn < 10bn
Reduce depreciate more than 5% over a 12-month period
Market Cap (INR) 156 62 11

One year price chart

1,600

1,400

1,200
(INR)

1,000

800

600
Dec-16
Aug-16

Oct-16
Apr-16

Nov-16
May-16

Sep-16

Jan-17

Feb-17
Jun-16

Jul-16

AIA Engineering

11 Edelweiss Securities Limited

Miscellaneous
DISCLAIMER
Edelweiss Securities Limited (ESL or Research Entity) is regulated by the Securities and Exchange Board of India (SEBI) and is
licensed to carry on the business of broking, depository services and related activities. The business of ESL and its Associates (list
available on www.edelweissfin.com) are organized around five broad business groups Credit including Housing and SME
Finance, Commodities, Financial Markets, Asset Management and Life Insurance.

This Report has been prepared by Edelweiss Securities Limited in the capacity of a Research Analyst having SEBI Registration
No.INH200000121 and distributed as per SEBI (Research Analysts) Regulations 2014. This report does not constitute an offer or
solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Securities as
defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 includes Financial Instruments and Currency
Derivatives. The information contained herein is from publicly available data or other sources believed to be reliable. This report is
provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The
user assumes the entire risk of any use made of this information. Each recipient of this report should make such investigation as it
deems necessary to arrive at an independent evaluation of an investment in Securities referred to in this document (including the
merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. The
investment discussed or views expressed may not be suitable for all investors.

This information is strictly confidential and is being furnished to you solely for your information. This information should not be
reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in
part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or
resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject ESL and associates / group companies to any registration or licensing
requirements within such jurisdiction. The distribution of this report in certain jurisdictions may be restricted by law, and persons
in whose possession this report comes, should observe, any such restrictions. The information given in this report is as of the date
of this report and there can be no assurance that future results or events will be consistent with this information. This information
is subject to change without any prior notice. ESL reserves the right to make modifications and alterations to this statement as
may be required from time to time. ESL or any of its associates / group companies shall not be in any way responsible for any loss
or damage that may arise to any person from any inadvertent error in the information contained in this report. ESL is committed
to providing independent and transparent recommendation to its clients. Neither ESL nor any of its associates, group companies,
directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential
including loss of revenue or lost profits that may arise from or in connection with the use of the information. Our proprietary
trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed
herein. Past performance is not necessarily a guide to future performance .The disclosures of interest statements incorporated in
this report are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in
the report. The information provided in these reports remains, unless otherwise stated, the copyright of ESL. All layout, design,
original artwork, concepts and other Intellectual Properties, remains the property and copyright of ESL and may not be used in
any form or for any purpose whatsoever by any party without the express written permission of the copyright holders.

ESL shall not be liable for any delay or any other interruption which may occur in presenting the data due to any reason including
network (Internet) reasons or snags in the system, break down of the system or any other equipment, server breakdown,
maintenance shutdown, breakdown of communication services or inability of the ESL to present the data. In no event shall ESL be
liable for any damages, including without limitation direct or indirect, special, incidental, or consequential damages, losses or
expenses arising in connection with the data presented by the ESL through this report.

We offer our research services to clients as well as our prospects. Though this report is disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. We will not treat recipients as customers by virtue of
their receiving this report.

ESL and its associates, officer, directors, and employees, research analyst (including relatives) worldwide may: (a) from time to
time, have long or short positions in, and buy or sell the Securities, mentioned herein or (b) be engaged in any other transaction
involving such Securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
subject company/company(ies) discussed herein or act as advisor or lender/borrower to such company(ies) or have other
potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of
publication of research report or at the time of public appearance. ESL may have proprietary long/short position in the above
mentioned scrip(s) and therefore should be considered as interested. The views provided herein are general in nature and do not
consider risk appetite or investment objective of any particular investor; readers are requested to take independent professional
advice before investing. This should not be construed as invitation or solicitation to do business with ESL.

12 Edelweiss Securities Limited

 AIA Engineering
ESL or its associates may have received compensation from the subject company in the past 12 months. ESL or its associates may
have managed or co-managed public offering of securities for the subject company in the past 12 months. ESL or its associates
may have received compensation for investment banking or merchant banking or brokerage services from the subject company in
the past 12 months. ESL or its associates may have received any compensation for products or services other than investment
banking or merchant banking or brokerage services from the subject company in the past 12 months. ESL or its associates have
not received any compensation or other benefits from the Subject Company or third party in connection with the research report.
Research analyst or his/her relative or ESLs associates may have financial interest in the subject company. ESL and/or its Group
Companies, their Directors, affiliates and/or employees may have interests/ positions, financial or otherwise in the
Securities/Currencies and other investment products mentioned in this report. ESL, its associates, research analyst and his/her
relative may have other potential/material conflict of interest with respect to any recommendation and related information and
opinions at the time of publication of research report or at the time of public appearance.
Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange
rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market
factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in
interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the
value of the currency. Investors in securities such as ADRs and Currency Derivatives, whose values are affected by the currency of
an underlying security, effectively assume currency risk.
Research analyst has served as an officer, director or employee of subject Company: No
ESL has financial interest in the subject companies: No
ESLs Associates may have actual / beneficial ownership of 1% or more securities of the subject company at the end of the month
immediately preceding the date of publication of research report.
Research analyst or his/her relative has actual/beneficial ownership of 1% or more securities of the subject company at the end of
the month immediately preceding the date of publication of research report: No
ESL has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately
preceding the date of publication of research report: No
Subject company may have been client during twelve months preceding the date of distribution of the research report.
There were no instances of non-compliance by ESL on any matter related to the capital markets, resulting in significant and
material disciplinary action during the last three years except that ESL had submitted an offer of settlement with Securities and
Exchange commission, USA (SEC) and the same has been accepted by SEC without admitting or denying the findings in relation to
their charges of non registration as a broker dealer.
A graph of daily closing prices of the securities is also available at www.nseindia.com
Analyst Certification:
The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about
the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or
indirectly related to specific recommendations or views expressed in this report.

Additional Disclaimers

Disclaimer for U.S. Persons

This research report is a product of Edelweiss Securities Limited, which is the employer of the research analyst(s) who has
prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States
(U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to
supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required
to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public
appearances and trading securities held by a research analyst account.

This report is intended for distribution by Edelweiss Securities Limited only to "Major Institutional Investors" as defined by Rule
15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and
Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as
specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied,
duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor.

13 Edelweiss Securities Limited

 Miscellaneous

In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC
in order to conduct certain business with Major Institutional Investors, Edelweiss Securities Limited has entered into an
agreement with a U.S. registered broker-dealer, Edelweiss Financial Services Inc. ("EFSI"). Transactions in securities discussed in
this research report should be effected through Edelweiss Financial Services Inc.

Disclaimer for U.K. Persons

The contents of this research report have not been approved by an authorised person within the meaning of the Financial
Services and Markets Act 2000 ("FSMA").

In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional
experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the
Order); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated
associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being
referred to as relevant persons).

This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment
activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant
persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This
research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other
person.

Disclaimer for Canadian Persons

This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have
prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not
associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by
a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario
Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of
Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research
analysts' business or relationship with a subject company or trading of securities by a research analyst.

This report is intended for distribution by ESL only to "Permitted Clients" (as defined in National Instrument 31-103 ("NI 31-103"))
who are resident in the Province of Ontario, Canada (an "Ontario Permitted Client"). If the recipient of this report is not an
Ontario Permitted Client, as specified above, then the recipient should not act upon this report and should return the report to
the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any Canadian person.

ESL is relying on an exemption from the adviser and/or dealer registration requirements under NI 31-103 available to certain
international advisers and/or dealers. Please be advised that (i) ESL is not registered in the Province of Ontario to trade in
securities nor is it registered in the Province of Ontario to provide advice with respect to securities; (ii) ESL's head office or
principal place of business is located in India; (iii) all or substantially all of ESL's assets may be situated outside of Canada; (iv)
there may be difficulty enforcing legal rights against ESL because of the above; and (v) the name and address of the ESL's agent for
service of process in the Province of Ontario is: Bamac Services Inc., 181 Bay Street, Suite 2100, Toronto, Ontario M5J 2T3 Canada.

Disclaimer for Singapore Persons

In Singapore, this report is being distributed by Edelweiss Investment Advisors Private Limited ("EIAPL") (Co. Reg. No.
201016306H) which is a holder of a capital markets services license and an exempt financial adviser in Singapore and (ii) solely to
persons who qualify as "institutional investors" or "accredited investors" as defined in section 4A(1) of the Securities and Futures
Act, Chapter 289 of Singapore ("the SFA"). Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations ("FAR"),
sections 25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to EIAPL when providing any
financial advisory services to an accredited investor (as defined in regulation 36 of the FAR. Persons in Singapore should contact
EIAPL in respect of any matter arising from, or in connection with this publication/communication. This report is not suitable for
private investors.
Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved

Access the entire repository of Edelweiss Research on www.edelresearch.com

14 Edelweiss Securities Limited