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AIA Engineering hosted a conference call on
Nov 14, 2022. In the conference call, the company was represented by Mr Kunal
and Mr Sanjay.
Key
takeaways of the call
Volume:
Q2 FY 2023 was the best quarter ever for the
company.In Q2FY2023, the company sold 78,500 MT (Produced 80,000MT) as against 69,064
MT in Q2FY2022 and 67,898 MT in Q1FY2023.
Most of the growth in quarter has come from
mining segment. The company has done 54,109 MT in Q2FY2023 against 48,333 Mt in
Q2FY2022. Mining segment volumes stood at 99,819 MT in H1FY2023 compared to 85,300
MT in H1FY2022.
Non mining segment has remained largely flat. Non mining segment volumes
stood at 46,579 MT in H1FY2023 as against 44,082 MT in H1FY2022.
Weighted average realization for the
quarter stood at Rs 167. The company has done most of the pass-through with
respect to shipping costs and raw material price increase.
Revenues from operations stood at Rs 1,328.66
cr in Q2FY2023 as against Rs 885.17 cr
in Q2FY2022.
Other income stood at Rs 32.14 cr in
Q2FY2023 as against Rs 20.64 cr in Q1FY2023 and Rs 35.72 cr in Q2FY2022.
EBITDA (including other income) came in at
Rs 344 cr at 25.9%.
PAT stood at Rs 244.81 cr in Q2FY2023 as
against Rs 137.59 cr in Q2FY2022.
Working Capital: The Company’s debtor and
inventory days are largely in line.
Inventory days have declined from 84 days as
on June 31, 2022 to 74 days in Sep 30,2022.
The company guides inventory days in the
range of 78-80 days going forward. Decline in inventory days is due to decline
in tonnage and higher sales value.
The receivable days stood at 64 days and
the company expects the same to normalise around 70-72 days.
US $ realization stood at Rs81.3/per US $ in Q2FY2023.
Cash
Balance: The net cash balance as on Sep 30,2022
stood at Rs 2050 cr.
The company has Short term debt of around Rs 460 cr
which is the export credit which the company has availed at a competitive rate.
The company will remain conservative with
respect to the cash in the balance sheet.
It will continue with the 20% dividend
policy.
Arrangement
with SAL Steel: The Company has entered into a
Supply Agreement for 3 years with SAL Steel (SAL) for supply of Ferro Chrome by
SAL to the Company on non-exclusive basis.
The company has given a loan of Rs 125 cr
to SAL Steel with a coupon of 10.5% pa. The same is secured against Fixed
assets of SAL Steel (Ferro chrome Plant and Power plant).
Canada
Border Services Agency assessment:The Canada Border
Services Agency (CBSA) has decided to carry out a review of the on-going
administration of the anti-dumping finding for export of certain grinding media
to Canada. The company will continue to co-operate with CBSA in this process
and will comply with any new guidelines that will be published in this regard.
It is an administrative decision and
whenever there is substantial increase in price it gets triggered.
The company has done around 3000 MT of
volume in the 1st half and expects around 5000-6000 MT of volume for
the full year.
Expansion:
Company has started Commercial Production
as its Greenfield Project of Mill Liners at GIDC, Kerala, Ahmedabad (Gujarat)
having an Installed Capacity of 50,000 MT per Annum. The company expects the
plant to be fully utilised by next 3-4 years.
The company has decided to go ahead with
its brownfield capacity expansion of grinding media. It plans to add 80,000 Mt
of capacity and plans to commission it by FY24.
Renewal
Power:Renewal power stood at 20-22%
of the total power consumption in FY2022 and the company plans to increase the
same to 35%.
CAPEX:
The company plans to incur CAPEX of around
Rs 480-500 cr in the current and next years, of which Rs 250 cr towards
Grinding unit plant, Rs 20 cr towards liner plant, Rs 50 cr towards liner plant
supporting infrastructure, Rs 60 cr towards captive power plant and around Rs
70 -100 cr towards Other supporting infrastructure.
The company has incurred around Rs 112 cr
towards CAPEX till September FY2022 and plans to incur around Rs 160-170 cr for
the rest of the financial year.
RoCE: At balance sheet level, the RoCE of the company is around 22%
however, excluding investment parked, the RoCE is around 27-28%.
Outlook:
The company is in line with achieving incremental
volumes in the range of 30000-35000 MT per year for next couple of years.
Ferro chrome prices and scrap prices are coming down.
Also, shipping prices are trending downwards.The company expects that the
average realisation has achieved its peak and expects it to moderate going
forward with a lag.
The company expects to maintain operating margin in
the range of 20-22% in the long run.
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