AIAENG - AIA Engineering Ltd. Share Price

In their earnings conference call held on August 13, 2025, AIA Engineering Limited's management provided key insights into the company's outlook and forward-looking statements. They reported a production of 59,500 tons and sales of 60,156 tons for Q1 FY '26, which reflects flat growth compared to the previous year and a decrease from 68,000 tons in the previous quarter. The revenue generated was INR 1,026 crores, along with a profit after tax (PAT) of INR 305 crores, compared to INR 259 crores in Q1 of the last year and INR 285 crores in the last quarter.

Management expressed optimism about future growth prospects, emphasizing that they are actively negotiating with a significant number of mining customers to convert from traditional forged solutions to their high chrome alternatives. While they anticipate a return to growth, they stated that the current fiscal year might end up flat due to ongoing strategic efforts and market conditions.

They also mentioned a substantial cash reserve of INR 4,083 crores, which is being conserved for future growth opportunities, including investments in plants in China and Ghana. A notable update was the Brazilian sunset review which reduced the countervailing duty (CVD) from 6.5% to 2.9%, marking a significant positive impact for the business.

Kunal Shah highlighted an ongoing investment in renewable power, aiming for about 100 megawatts capacity, which would result in approximately 55% of their energy requirements being sourced from green energy. Overall, management maintained a cautious but optimistic view, indicating uncertainty regarding near-term growth but expecting a resumption of upward momentum in the coming fiscal year. They reaffirmed that this year would serve as a waiting period before substantial volume growth could be expected.

Q&A Section Summary from AIA Engineering Limited Q1 FY '26 Earnings Conference Call (August 13, 2025)

Question from Bhoomika Nair: You mentioned there would be a flattish volume. Is there a shift in guidance regarding growth due to conversion efforts?

Answer: I reiterated that we are not providing specific growth guidance for this year. While we're making significant efforts, we anticipate there might be a flat year before ramping up next fiscal year. By end of Q2, we hope to provide more clarity on growth.

Question from Bhoomika Nair: With the anticipated 50% duty, do you foresee any impact on volumes in the U.S.?

Answer: No, our customers are currently paying high tariffs, and dialogues to mitigate these costs are ongoing. Despite discussions, we have not seen any withdrawal from customers, indicating that volumes might be stable.

Question from Bhoomika Nair: What's the timeline for the operational plants in China and Ghana?

Answer: We expected land acquisition and approvals to happen this quarter, but it's taking longer than anticipated. I hope to share updates in the next quarter or within two quarters.

Question from Bhoomika Nair: The margin has increased this quarter; what were the contributing factors?

Answer: Excluding treasury income, our operating margin is between 29%-30%. This quarter, we benefited from a favorable product mix and lower tax provision, but this margin level may not be sustainable long-term.

Question from Priyankar Biswas: Is the high realization of INR170 sustainable in the near term?

Answer: Realization reflects product mix and cost reductions from freight and raw materials. While this quarter shows an abnormal margin, we expect a normalizing trend in subsequent quarters due to passing through costs.

Question from Priyankar Biswas: What's the status of our exploration in Latin America, particularly in copper?

Answer: We remain excited and confident about opportunities in this region, though we have deferred updates until we secure meaningful contracts to report on.

Question from Devaan Shah: Regarding the cash reserves, are they for the failed Welcast buyback?

Answer: There's been confusion; this cash isn't for a buyback but is reserved for future growth opportunities. We are conservative with our cash due to the business's growth potential.

Question from Varun Jain: Given the renewable energy investment, where do you see power and fuel costs settling in the near-term?

Answer: As we increase renewable power capacity, costs could reduce to around 6% to 6.5% of sales, down from 7% currently.

Question from Varun Jain: What was the extent of recovery concerning the earlier mentioned destocking volumes?

Answer: We have seen recoveries; on average, we anticipate returning to previous volume levels soon, though not all customers have normalized yet.

Question from Bhavin: How are the mill liners performing and what's the current utilization rate?

Answer: We've seen stabilization and are working closely with customers on trials. Currently, we are operating between 25,000 to 30,000 tons capacity out of 75,000 tons.

Question from Amit Khetan: How much growth in mining volumes do you expect due to conversions versus regaining old volume?

Answer: We foresee growth primarily from conversions, not just recovering lost volume. Ongoing negotiations with customers indicate a focus on newer solutions that could boost our overall share.

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