New Plants In China And Ghana Will Expand Global Reach

Key Takeaways

• New plant investments and integrated solutions are poised to expand market reach, boost client conversions, and support sustained revenue and margin growth.
  
• Renewable energy adoption and stronger export competitiveness will enhance cost efficiency, open new markets, and lift free cash flow.
  
• Growth and profitability face uncertainty due to regulatory delays, unsustainable margin drivers, slow business ramp-up, and challenging market dynamics in key regions.

Catalysts

Designs, develops, produces, installs, and services high chromium wear, corrosion, and abrasion resistant castings in India and internationally.

• The company is investing in new plants in China and Ghana, which, once operational, will expand geographic reach and customer base, supporting long-term revenue growth as infrastructure and mining demand rise in emerging markets.
  
• Significant R&D efforts and the launch of integrated solutions (e.g., combining proprietary mill liners and grinding media) are targeting conversions with major mining clients, which could unlock large new contracts and drive revenue and margin expansion.
  
• AIA's increasing investment in renewable energy is set to reduce power costs from 7% of sales toward 6%, directly improving net margins and free cash flow over the next 12–24 months.
  
• Easing of antidumping duties in Brazil increases AIA's price competitiveness, opening up new market share and supporting higher export volumes and earnings amid growing global demand for efficient, high-performance wear parts.
  
• Secular increases in demand for metals and cement, driven by global infrastructure and urbanization trends, are likely to result in higher order volumes for AIA's advanced products, supporting a sustained uplift in revenue trajectory.

AIA Engineering Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming AIA Engineering's revenue will grow by 8.2% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 24.7% today to 22.7% in 3 years time.
• Analysts expect earnings to reach ₹12.3 billion (and earnings per share of ₹132.15) by about August 2028, up from ₹10.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 40.4x on those 2028 earnings, up from 27.6x today. This future PE is greater than the current PE for the IN Machinery industry at 32.2x.
• Analysts expect the number of shares outstanding to decline by 1.02% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.61%, as per the Simply Wall St company report.

AIA Engineering Future Earnings Per Share Growth

Risks

• High U.S. tariffs (currently 50%) and 10% anti-dumping duties create ongoing unpredictability and potential volume/margin losses in the key North American market, with management unable to provide clarity on medium-term implications-this poses a direct risk to revenue and net margins.
  
• Global high-chrome grinding media industry volumes have seen limited growth over the past five years, with much of the market characterized as a zero-sum game between AIA and its main competitor-this signals an industry headwind that limits potential for sustainable volume and revenue growth.
  
• Project execution for international expansion (China and Ghana plants) faces significant regulatory and procedural delays, with management unable to commit to clear commissioning timelines-this delays diversification, increases capital at risk, and could impact future earnings growth if prolonged.
  
• Current margin uplift is attributed to favorable but unsustainable temporary factors such as product mix and falling raw material/freight costs; management cautions that normalized operating margins (23-24%) are much lower than the outperformance seen this quarter, indicating risk of net margin compression in future periods.
  
• Mill liner business, touted as a growth engine, is ramping up more slowly than anticipated (operating at below 40% capacity), and continued customer conversion takes longer than planned, exposing the company to underutilization risk, fixed cost absorption issues, and potentially delayed impact on revenue and profitability.

Valuation

• The analysts have a consensus price target of ₹3677.1 for AIA Engineering based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹4165.0, and the most bearish reporting a price target of just ₹3140.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹54.3 billion, earnings will come to ₹12.3 billion, and it would be trading on a PE ratio of 40.4x, assuming you use a discount rate of 14.6%.
  
• Given the current share price of ₹3132.5, the analyst price target of ₹3677.1 is 14.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.