AIA Engineering hosted a conference call on February 07, 2024. In the conference call, the company was represented by Mr Kunal and Mr Sanjay.

Key takeaways of the call

Q3 was a steady quarter for the company

Volume:

In Q3FY2024, the company sold 74140 MT (Produced 82708 MT) as against 71439 MT in Q3FY2023.

Of the 74140 MT volume sold in Q3, 53395 MT is from mining and 20745 MT is from others.

For 9 months FY2024, the company sold 225911 MT as against 217837 MT in 9MFY2023.

Of the total 225911 MT volume sold in 9M, 158744 MT is from mining and 67167 is from others.

Realization has dropped from Rs 164/ton to Rs 154/ton in Q3FY2024 due to change in product mix between grinding media and non-grinding media and change in alloy mix. The company expects realization to be in the range of 150-160 /tonne depending on the product mix.

Revenue from sales stood at Rs 1,146 cr in Q3FY2024 as against Rs 1251.8 cr in Q3FY2023.

EBITDA for the quarter stood at Rs395 cr as compared to Rs 444 cr in Q2FY2024 and Rs 483 cr in Q3FY2024.

EBITDA margin stood at 33.79% in Q3FY2024 as against 34.32% in Q2FY2024.

PAT stood at Rs 279 cr in Q3 FY2024.

Other income included foreign exchange gain of Rs 17.4 cr in Q3FY2024.

Freight cost: There is an impact on freight cost due to Red sea insurgence. However, it is not reflected in Q3 P&L. There will be an impact in Q4. However, if it is  sticky than the company will try to pass it on to the customers on a lag basis.

Utilization: The company is operating at 50-60% of overall capacity and intends to reach capacity utilization of around 80%(Installed capacity of 4,40,000 tonnes) in next three years.

Cash Balance: The company has a cash balance of Rs3100 cr as on Dec 31,2023.

The company is little conservative and plans to incur regular capex of around Rs 200-250 cr every year till it reaches volumes of 350000 -400000 MT . The company wants to retain the cash as it also is looking for inorganic opportunities if it comes up. As such will not take any call on returning cash  at least for next one year to its shareholders.

The company uses export packaging credit to the extent of Rs 400-450 cr and does not have any term loans.

Expansion: The company is increasing non grinding media capacity by around 20000 tonnes .

The company is working on brownfield capacity expansion of grinding media. It plans to add 80,000 MT. Both are on track and will take the company’s total capacity to 540000 tonnes.

The company does not have plans to increase mill liners capacity for next 2-3 years.

CAPEX: The company has incurred a total CAPEX of around Rs146 cr for 9MFY2024. The company will spend around another Rs 50 cr towards end of the FY2024.

The company plans to incur a total CAPEX of Rs 500 cr of which Rs 200 cr will be towards grinding media plant which is in the process of setting and the company plans to commission it by Dec 2024-March 2025. The company also plans to incur another Rs 200 cr towards de-bottle necking of various plants and Rs 100 cr towards renewable energy.

Cement: The company market share is 95% in India for cement and ex China it is around 35%.

Acquisition: The company has invested Rs 43 cr to acquire 30% stake in an Australian company MPS.

MPS are experts in complementary mill liner designs and this will add capabilities for the company.

The company plans to increase its stake to majority stake going forward in MPS.

Outlook:

The company has a order book of Rs 664 cr as on January 1, 2024.

The company has done volumes of around 292000 MT in FY2023 and expects to do incremental volumes of around 10000 for FY2024 touching300000 MT.

The company has provided directional EBITDA margin in the range of 20-22% which the company retains.

The company is well placed to capture the opportunity, it has enough capacity and also talent in place. However, it is taking more time to convert. There are lot of customers with 25000-30000 tonnes in pipeline and couple of customers in 5000 tonnes category. The company is committed to conversion opportunities but it is taking longer time than expected.

The company expects to do incremental volume of 25000-30000 tonnes per year going forward.

Non mining demand for the company is around 80000-90000/tonnes per year and the company expects that to continue.

The company’s solutions has deep opportunity as it improves operational parameters for the mining companies as the grades of copper are falling and the companies have to run at optimal utilization.