The Q4FY08 results of were above our estimates on the profitability front. During the recently concluded quarter, the company reported net sales of Rs2 billion as against Rs1.5 billion in Q4FY07, thereby registering 33.4% Y-o-Y and 7.8% sequential growth. For FY08, revenues grew 32.1% Y-o-Y to Rs6.9 billion.
On a consolidated basis, the company produced 24,343 MT in Q4FY08 against 18,046 MT in Q4FY07 registering Y-o-Y growth of 34.9%. Sequentially, it grew by 3.4% due to additional contribution from the expanded capacities.
EBIDTA margins during Q4FY08 were up 300 bps on Y-o-Y basis to 23.6%. This was primarily due to expansion of capacities resulting into economies of scale.
However, margins are down by 420 bps on a sequential basis as the company has taken the impact of price increases due to rupee appreciation in the previous quarter. Also, the raw materials to sales ratio rose from 42.9% in Q4FY07 to 46.4% in Q4FY08. This impacted the margins in Q4FY08.
PAT for Q4FY08 was at Rs441 million, up 90.1% Y-o-Y and up 9.3% on a sequential basis, thereby translating into quarterly EPS of Rs23.4.
At present, the company has 165,000 TPA capacities on a consolidated basis. Post expansion, the consolidated capacities would rise to 265,000 TPA. The expanded capacity would lead to CAGR of 38.1% in revenues and CAGR of 39.8% in the profits of the company from FY07 to FY09E.
AIA has also approved a stock split. Thus, five equity shares of Rs2 each would be issued for one equity share of Rs10 each.
We maintain our earnings estimates and expect AIA to report consolidated EPS of Rs98.1 for FY09E. At the current market price of Rs1,468, the stock trades at 3.5x book value, 15.0x earnings and 13.6x cash earnings based on FY09E.
We recommend BUY on the stock with a price target of Rs1,870 levels, which provides 28% upside potential form current levels.