AIA Engineering hosted a conference call on Jan 27, 2023. In the conference call, the company was represented by Mr Kunal and Mr Sanjay.

Key takeaways of the call

Volume:

In Q3FY2023, the company sold 71,439 MT (Produced 64854 MT) as against 58,111 MT in Q3FY2022 and 78500 MT in Q2FY2023.

Mining volumes stood at 44,284 MT in Q3FY2023 against 41,147 Mt in Q3FY2022. Mining volumes stood at 1,44,103 MT in 9MFY2023 compared to 1,26,447 MT in 9MFY2022.

Non mining volumes stood at 27,155 MT in Q3FY2023 as against 16,964 in Q3FY2022. In 9MFY2023 Non mining volumes stood at 73,734 as against 61,046 MT in 9MFY2022.

Weighted average realization for the quarter stood at Rs 169.

Revenues from operations stood at Rs 1,209 cr  in Q3FY2023 as against Rs 833 cr in Q3FY2022.

Other income stood at Rs 117.95 cr in Q3FY2023 as against Rs 42.30 cr in Q3FY2022. Other income includes forex gain of Rs 75.88 cr due to rupee depreciation against US dollar and cross currency gains.

Cost pressures including Raw material, currency, freight, container availability has eased during the quarter.

Operating margin for the quarter stood at 29.8%. Increase in operating margin to the tune of 2-3% was on account of product mix.

Also raw material cost has come down to the tune of 8-10% during the quarter. Most of the contracts of the company has price pass through which happens in a lag. As such when raw material prices reduce, prices will also reduce.

Ferro chrome was in the range of Rs 117 per kilo which is now around 100-105 per kilo around 10% down.

EBITDA for the quarter stood at Rs 484 cr highest ever for the company and for 9M stood at Rs 1095 cr.

Working Capital: The company’s debtor and inventory days are largely in line.

Raw material as on Dec 31,2022 stood at Rs 138 cr around 30 days and WIP stood at 991 cr around 70 days.

The receivable days stood at 63 days as against 73 days in Q3FY2022.

Cash Balance:The net cash balance as on Dec 31,2022 stood at Rs 2300 cr.

The company will remain conservative with respect to the cash in the balance sheet and the company does not have any plans to distribute cash for the next one year. Also, the company does not have any plans to diversify from its core business.

Utilization: The company operated around 65% capacity utilization in Q3FY2023 and at optimum level utilization can be around 75-80%.

Expansion:

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 end of FY24.

Renewal Power:Renewal power stood at 20-22% of the total consumption and the company plans to increase the same to 35%.

CAPEX:

The company plans to incur CAPEX of around Rs 200 cr in FY2023 of which Rs 133 cr has been incurred till date.

The company plans to incur CAPEX of around Rs 300 cr in FY2024, of which Rs 200 cr towards Grinding unit plant, Rs 30 cr towards acquisition of land and the balance towards maintenance expenses and others.

Outlook:

The company expects volume of around 295000 MT to 3,00,000 MT for the whole year FY2023. The company expects volumes of around 100,000 MT from Others (Cement) in FY2023 as against 90000 in FY2022.

The company expects incremental volume of 30000 MT for FY2024 including mill liners.

The company expects to produce and sale around 6000 MT from the new mill liner plant of which around 2500 has been achieved till Q3 and expects to achieve balance around 3500 MT in Q4FY2023 and total around 24000 MT from mining mill liners for FY2023 (for whole of the year)

From the margin perspective in the long run the company plans to achieve 20-22% operating EBITDA margin on base case. However in Q4 it might be volatile. It will be difficult to predict how the margin will play out in FY2024.

The company expects the realization to decline on account of decline in raw material cost, freight cost and due to supply chain easing.