AIA Engineering

AIA Engineering reported Q3 FY25 sales tonnage of 65,780 tons, marking a 9.63% sequential increase from 60,000 tons in Q2 FY25, though it was an 11.11% decline from 74,000 tons in Q3 FY24. Revenue for the quarter stood at INR 1,050 crores, with an EBITDA of INR 354.57 crores. Profit After Tax (PAT) was INR 259.22 crores, showing a modest 1.25% QoQ growth but a 7.42% YoY decline from approximately INR 280 crores in Q3 FY24. Realization for the quarter was stable at INR 160 per kilo.

The company announced a significant change in its manufacturing strategy, moving towards setting up production facilities outside India. This includes modular plants in China and Ghana, with a combined capacity of up to 50,000 tons and an estimated total capex of USD 50 million. This shift is driven by the need to mitigate volatile freight environments, improve market access, and reduce shipping transit times. Management expects the China plant to start contributing in the second half of next year, and the Ghana plant within the next 18 months.

For the full year FY25, AIA Engineering maintains its volume guidance between 250,000 and 260,000 tons. Management expressed confidence in returning to a predictable growth path, expecting an annual incremental volume addition of 25,000 to 30,000 tons on a rolling basis within the next 2-3 quarters. Sanjay Majmudar further added that they anticipate 30,000 to 40,000 tons of incremental annual volume growth from new mine conversions on a rollover basis, indicating no major customer losses.

The company reported strong operating margins, in the range of 27-28% excluding treasury and other income, attributing this to factors like product mix. While acknowledging the current robust margins, management remains conservative in its guidance, citing potential price challenges that could arise with a significant increase in volumes and conversions. However, they believe margins should be 'definitely better than 21%, 22% on a medium- to long-term basis'.

Beyond the USD 50 million allocated for the new China and Ghana plants, the company plans to invest up to INR 50 crores in renewable power projects this year and next. Additionally, annual maintenance capex is projected to be up to INR 50 crores. The total capex, including the international plants, renewable power, and maintenance, is expected to be around INR 515 crores for the next fiscal year, with management emphasizing capital efficiency and modular plant designs.

The rubber and composite liner business, which added 20,000 tons of capacity in January, has seen a slower-than-expected trajectory. While small quantities have started to be delivered, management anticipates a ramp-up over the next year. Despite the slower start, the liner business remains a strategic offering to provide comprehensive solutions to customers and is considered an important tool for market penetration.