AIA Engineering

AIA Engineering reported a stable Q2 FY26, with total tonnage sold reaching 63,000 tons, contributing to a half-year total of 123,000 tons. Revenue for the quarter stood at ₹1,029 crores, generating an EBITDA of ₹395 crores, which translates to an EBITDA margin of 38.38%. Profit After Tax (PAT) for the quarter was ₹277 crores. The average realization per kilogram for the quarter was ₹163, indicating a consistent financial performance in line with the previous quarter.

The company announced a significant 18-month contract from Chile, valued at $33 million, for 22,000-23,000 tons of hi-chrome grinding media. This order represents AIA Engineering's first major breakthrough in the South American market and for hi-chrome grinding media in that region. Annual sales from this contract are projected to range between 13,000-18,000 tons, with offtake expected to commence in Q4 FY26. This win validates the company's solution-based approach and its ability to secure large, strategic orders.

AIA Engineering is increasingly emphasizing a unique liner-driven solution that combines liners and grinding media, offering benefits beyond just cost savings, such as improved throughput and reduced power consumption. This approach aims to differentiate the company from competitors and address the challenges of converting conservative mining customers. Successful trials have been conducted in 10-12 mines, with final outcomes for larger mines expected in December and January-February, which could lead to further significant orders.

Management expressed confidence in achieving a minimum of 30,000 tons of additional annual volume growth from next year onwards, driven by new initiatives and the solution-based strategy. The company currently has a robust prospecting pipeline of 200,000-250,000 tons, indicating substantial future growth potential. This pipeline includes work at over 50 mining sites globally, with several in advanced stages of conversion.

The company's current blended capacity utilization stands at approximately 55-60%. For FY26, the CAPEX guidance remains at ₹180 crores, with around ₹40 crores already incurred. This includes investments in the MPS subsidiary and a ₹30 crore allocation for hybrid and renewable solar projects. Long-term, the average annual CAPEX is projected to be around ₹150 crores, supporting ongoing capacity creation and strategic initiatives, including planned, but not yet established, facilities in Ghana and China.

The Q2 operating margin was noted to be around 28.3%, while gross margins generally range from 38% to 39%. Management reiterated its sustainable operating margin guidance of 20-22%, acknowledging that current higher margins are due to a favorable product mix. As the company scales up volumes, particularly in grinding media, the average realization and margins are expected to normalize towards the guided range, reflecting the changing product mix.

The company confirmed the closure of its Welcast Steel Plant, citing its age, awkward location, and lack of financial viability for further investment. This decision was made in the interest of financial prudence, as the parent company has sufficient capacity created elsewhere. The closure is not expected to impact the company's overall operational capabilities.