AIA Engineering Limited

Castings & Forgings

Annual Returns

Cumulative Returns and Drawdowns



Fundamentals








Ownership




Margined





AI Summary

asof: 2025-12-03

AIA Engineering Limited (AIAENG) Analysis

FY’26 H1 Overview: Consolidated revenue ₹2,087 Cr (+1% YoY), volumes 123k tons (+2.5% YoY), EBITDA margins ~28% (elevated due to favorable mix/FX; guided 20-24% sustainable), PAT ₹583 Cr (+13% YoY). Strong balance sheet (cash/investments ~₹5,000+ Cr), utilization 55-60% on 460k ton capacity. Chile order (USD 33 Mn, ~15k tons/year) is key milestone.

Headwinds

  • Flat/Stagnant Volumes: Mining segment degrew 2.5% YoY in H1; customer inventory destocking (20-30k tons potential drag).
  • Trade Barriers: US ADD/CVD (6.91% + 3.16%) effective Jun’25; customers absorbing but some slowdown/negotiations.
  • Margin Pressure Ahead: Shift to lower-margin grinding media (₹100-110/kg vs. liners ₹300-350/kg) as volumes ramp; current 28%+ EBITDA unsustainable.
  • Competitive Intensity: Forged media players (e.g., Molycop acquisition by Indian player); Chinese hi-chrome commoditized.
  • Operational: Subsidiary Welcast closure (non-material); Nagpur unit shutdown.

Tailwinds

  • Breakthrough Orders: Chile copper mine (first hi-chrome adoption; low penetration in S. America); Q4FY26 offtake starts (~3-4k tons).
  • Solution Differentiation: Liner + hi-chrome packages boost customer throughput/power savings (vs. pure forged); trials successful in 10-12 mines (incl. India, Africa).
  • Favorable Mix/FX: Q2 EBITDA ₹395 Cr aided by FX gains (₹33 Cr), export incentives (₹18 Cr), treasury (₹64 Cr).
  • Strong Finances: Net cash position, low debt, annual CAPEX ₹150-180 Cr (debottlenecking, renewables, Ghana/China plants).
  • Non-Mining Growth: +10% YoY in H1 (cement/thermal).

Growth Prospects

  • Volume Ramp: +30k tons incremental FY27 (min); pipeline >200k tons (50+ mines, 8-10 advanced trials concluding Dec-Feb’26). Hi-chrome market: 1.5-2 Mn tons opportunity (gold/copper/iron; current 25-30% penetration).
  • Geographic/Market Expansion: S. America (Chile/Peru/Brazil: 700-800k tons forged); Africa (Ghana/Nigeria); aim sustained YoY growth post-FY26.
  • Capacity/Margins: Utilization to 70-80%; EBITDA 24-25% long-term if mix holds.
  • Catalysts: 2-3 more large wins expected Q3-Q4FY26; renewable energy CAPEX for cost savings.

Key Risks

Risk Category Details Mitigation
Execution Long sales cycles (1-2+ years); trial conversions uncertain (conservative miners). 10+ successful trials; Chile as reference.
Trade/Regulatory ADD probes (US, potential others); tariffs erode realizations. Solution packaging reduces dumping risk; sell to willing customers.
Macro/Commodity Ferrochrome/scrap volatility (50-70% RM cost); mining slowdown. Full pass-through; inventory buffers.
Competition Molycop/Tega scale-up in hi-chrome/liners. Unique design engineering + throughput guarantees.
Financial/Other FX volatility; subsidiary drags (e.g., Welcast). ₹4-5k Cr cash hoard; non-material impact.

Overall Outlook: Steady H1 sets stage for FY27 re-rating via volume inflection (15-20%+ CAGR potential). Chile validates strategy; focus on conversions key. Risks skewed to execution/trade, but robust fundamentals support premium valuation. Buy on dips for long-term compounding.

   

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