AIAENGNSEMay 25, 2022

AIA Engineering Limited

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14analyst exchanges

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Management on call

Kunal Shah

AIA ENGINEERING LIMITED

Sanjay Majmudar

AIA ENGINEERING LIMITED

Key numbers — 40 extracted

rs,

all got a chance to look at our numbers but neverthelesswe will give you a quick summary on numbers, share a bit of the update on the market and we will get into Q&A. We are happy that this will be

1000 crore

date on the market and we will get into Q&A. We are happy that this will be our, we crossed the 1000 crores mark in a quarter, first time in history and we are very happy about it. We have done Rs.180 cro

Rs.180 crore

1000 crores mark in a quarter, first time in history and we are very happy about it. We have done Rs.180 crores of revenue in the quarter and that came from about 73, 000 tons of sales and 70,000 tons of prod

35,014 crore

let share with our existing customers. So, for the full year from a revenue standpoint, we are at 35,014 crores and that is up from about Rs.28000 crores that we have done full year last year, of course a lot

Rs.28000 crore

o, for the full year from a revenue standpoint, we are at 35,014 crores and that is up from about Rs.28000 crores that we have done full year last year, of course a lot of that is accounted by the increase in s

Rs.264 crore

our realization reflects a lot of that past through come along. Moving forward,our EBITDA is at Rs.264 crores that is up from Rs.192 crores in the last fourth quarter last year and Rs. 203 crores in the thi

Rs.192 crore

of that past through come along. Moving forward,our EBITDA is at Rs.264 crores that is up from Rs.192 crores in the last fourth quarter last year and Rs. 203 crores in the third quarter this year, that is

Rs. 203 crore

EBITDA is at Rs.264 crores that is up from Rs.192 crores in the last fourth quarter last year and Rs. 203 crores in the third quarter this year, that is about 24.20% and profit after tax of 194 crores. So, ove

24.20%

he last fourth quarter last year and Rs. 203 crores in the third quarter this year, that is about 24.20% and profit after tax of 194 crores. So, overall, we had a decent quarter in terms of financials

194 crore

r and Rs. 203 crores in the third quarter this year, that is about 24.20% and profit after tax of 194 crores. So, overall, we had a decent quarter in terms of financials some housekeeping numbers our expor

Rs.13 crore

inding media exports and duty drawback for grinding media and non-grinding media. The total is at Rs.13 crores, at least 10 crores is what we have lost on account ofRoDTEP and removal of RoDTEPon g

10 crore

d duty drawback for grinding media and non-grinding media. The total is at Rs.13 crores, at least 10 crores is what we have lost on account ofRoDTEP and removal of RoDTEPon grinding media and th

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Guidance — 20 items

Kunal Shah

opening

“We are happy that this will be our, we crossed the 1000 crores mark in a quarter, first time in history and we are very happy about it.”

Kunal Shah

opening

“So, the average realization for the full year stands at 134 and which is up from 105 full year last year, and the realization for the last quarter is at 148 so over last 4-5 quarters you have actually seen the whole pass through come along and that was a concern that many people had in terms of how we will be able to pass on our different costs especially raw material and shipping and you will see that our numbers now our realization reflects a lot of that past through come along.”

Kunal Shah

opening

“So, with that we are 390 tons with the mill lining we will be at 440 tons and with the 80,000 tons of grinding media, will be at 520,000 tons, a half million tons of capacity for high grown products.”

Kunal Shah

opening

“So, total of Rs.300 crores is the guidance for our capital spend in FY2022-FY2023 and another 100-120 crores in FY2023-2024 which will be the balancing for the grinding media plant.”

Sanjay

opening

“2022-2023 and 2023-2024 and reasonable surety given by the sales teams and then therefore based on which Kunal has declared and we have discussed in the board and it has been declared that we should be able to do conservatively any where between 30k-40k this year as well as going forward even in next year but as we progress as we actually start achieving the number we will talk more about it.”

Ravi Swaminathan

“So, if you can give your thought process on that will be great Sir.”

Ravi Swaminathan

“Okay, and South Africa also it will be very small quantity as of now?”

Ravi Swaminathan

“And what kind of volumes we can expect this year or probably next yearany steady set volume number that you have in mind.”

Kunal Shah

“The plant can produce at 90% utilization 80%-90% between 40,000-45,000 which we hope to fully utilize it in next 3-4 years.”

Kunal Shah

“I think you should project anupside with the realization on mining liner.”

Risks & concerns — 12 flagged

So, the average realization for the full year stands at 134 and which is up from 105 full year last year, and the realization for the last quarter is at 148 so over last 4-5 quarters you have actually seen the whole pass through come along and that was a concern that many people had in terms of how we will be able to pass on our different costs especially raw material and shipping and you will see that our numbers now our realization reflects a lot of that past through come along.

— Kunal Shah

So, at least Rs.15 crore I would imagine, so there is a full year impact of about 60 crores on account the RoDTEPchanges that came along.

— Kunal Shah

So, we are happy that with the travel that has opened up the conversations that we are having with our customers lead us to and what we have done last year in a very difficult year, the customers that we added gives us this confidence that we should now get back on to our growth trajectory and with that we are very happy to inform that we got back the Brownfield expansion for grinding media from the cold storage we had paused it after the COVID linked, slow down that was there in calendar 2020.

— Kunal Shah

And the concern was shipping, and we were hesitant to say we can grow despite high shipping, but we spend the year with high shipping rate more than a year, right?

— Kunal Shah

And if the shipping rates are higher by three times or four times is the symbolic of the stress and the problem that is there in that supply chain.

— Kunal Shah

It was a mining application which is the grinding is mining end, is something that is catch up for us as far as the process is concern or the mining application is concern and that is where we are have invested the time for the last 3-4 years because we were setting up the plant that is something that we spend time on and we believe now we are ready to take advantage of that.

— Kunal Shah

So, exactly happened, is there any risk?

— Priyankar Biwas

It will be difficult, it is not something we track because our financial do not change based on that, right we are agnostic to what ore type so with it, it is not something that we would really like to share at this time that level of detail.

— Kunal Shah

We thought that is going to be a challenge but we are passing through that depends by the time you pass through cost go down and we have to refrain from holding it.

— Kunal Shah

So, basically, what we trying to understand is how much of this volume could again be at risk of the duties which have been facing for 12-18 months.

— Amit Anwani

So, out of this 230, I just wanted to understand is there any volume which is at risk of competing with Magotteaux or coming under any such duties in future.

— Amit Anwani

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Q&A — 14 exchanges

My first question is with respect to overall activity in mining with commodity prices especially copper etc., continuing to remain on a higher side. How is the activity across the globe if you can touch upon whether there is an increase in plants in terms of output across the miners and is there any more mines being opened. So, if you can give your thought process on that will be great Sir.

Kunal Shah

Sure. I think nothing more to add than what you read in the newspaper, I do not think there is any specific insight about it but clearly they are all doing well when ore prices good, I am not saying high, when they are good. Everyone wants as much tonnage to be produced and sold, right? So, everybody is operating at a high utilization levels side now for sure. They want to take fewer downtimes as much possible. So, anything that helps with them is clearly on the table for discussion. New plant lot of people are announcing, they are setting a capacity but it takes time, it is not going to be ne

Firstly, on this guidance to 30,000-40,000 tons of extra volumes, so generally in our business we would have probably done the trails and also, you must be fairly concurrentof these volumes from new mines right?

Kunal Shah

Yes, that is efforts that they have done. We did this in last year but unfortunately that duties stuff came up and we had to lose volumes or this would have been a growth year for us. And the concern was shipping, and we were hesitant to say we can grow despite high shipping, but we spend the year with high shipping rate more than a year, right? And the change in mindset is that we cannot live, hoping that rate goes down and we will grow there after that is the mindset change that has happened over last quarter or two. Assume that this prevails what does life look like, what can we achieve kee

Sir, I have two questions, one on your mill lining plant, so this facility in the sales cycle for this, what would be the strategy and how easy is it considering the fact that in this we are seeing customer adoption towards the rubber plus metal bases mill lining. So, some comments there if we were gainer on ferro to high chrome here are we slightly at a tougher situation?

Kunal Shah

So, the mill lining business selling tool is an application which is generally mutually explicit to rubber because rubber exist on the secondary and tertiary side the metal exits on the larger mills called SAGmills or primary mills, generally that is occupied by a metal which is where our product exist where rubber is concern the moving to rubber to rubber and metal, okay. I do not think in those larger mills with high impact there is a migration from metal to metal rubber, we will not come across such incidences. We are talking of a market where we competing with other metal lining producers

Sir, my first thing is that I wanted to clarify, you said 6000-7000 tons FY2022 from Canada and South Africa, this is in FY2022 totally or was it only in fourth quarter?

Kunal Shah

Sorry. what was your question. Canada. Whole year. Whole year. Yes. this quarterit is very minimal volume. Okay the other thing was Brazil has done around 10,000, the number is short, it used to do something like 20,000. So, are we seeing that kind of scaling up in the next two years from Brazil as well. The Brazil answer was just an indicative. Like I said we cannot keep slicing at the time, we had lost 16000 or 18000 tons because there was a material event, right. we keep losing and getting customers at time because of different condition. I do not think 10,000 tons in the scale if adding 16

I have two questions, the first one on the stingy order book, so if I see order book it seems to be on lower side. Is it a function of price or volume.

Kunal Shah

Because we have now moved to rate contracts with a large of customers and they place monthly orders, quarterly orders for deliveries in the near future, right? So, as a practice we are not adding contract orders under the order book and that is why this figure looks, I do not think that is a material figure now. Okay the second question is the stingy on your growth plan, so if I look at global major miners like the Vale, Glencore and I will not go into specific because you will not go into specific. So, their guidance is rather state, it is very static guidance, we talk off any metal players f

Sir, you mentioned that while you lost some 40,000 tons because of Canada and South Africa, you gained about 30,000 odd ton from new customers, could you give some flavor of who these new customers are and where are we getting these new customer

Sanjay Majmudar

Difficult as such we are not actually sharing the names of the customer as a matter policy but just to give a little flavor the key geographies where we are very bullish and we see a lot of traction is the Central America, the Latin America part i.e., the entire Latin America, then the entire African Region, Australia, CIS, these are the regions where a lot of traction we are seeing, lot of additional incremental customers we have gained in the core three ores that we are talking about that is gold, copper and iron. The second question is on your opting of the guidance on the capital expenditu

Thanks a lot Sir, my question has been answered. Thank you.

Management

My first question is let say hypothetically if there were not much of PAT disruption let say on the container availability and those. So, how much extra volumes you could have done in FY2022 rough estimate.

Sanjay Majmudar

Hypothetically answering your question, you when at the beginning of COVID, we were all geared up for similar kind of volumes coming from FY2021. At that point in time,we were talking of 25,000-30,000 tons per annum. So, I think as a hypothetical answer you can take it 25000-30000 tons a year which we have now clearly say and we were very conservative in even not giving any guidance till we saw it happening with confidence coming from our sales team and that is why this time while we had already indicated earlier, we are talking of anywhere between 30,000-40,000 should come based on the develo

First question is pertaining if you could share the metal wise split broadly for last year between the three major ores just to get some sense of what contributes how much on historical basis not forward looking.

Kunal Shah

Of all three represent growth opportunity for us. We are agnostic to gold and copper we were able to add down process benefit which is increase in recovery etc., those are ores of interest to us but iron ore also is one very large market and that continues to our an important in the application for us. In terms of percentage contribution, to total volumes, how much would be each? It will be difficult, it is not something we track because our financial do not change based on that, right we are agnostic to what ore type so with it, it is not something that we would really like to share at this t

Just wanted to understandrecently India and Australia signed a free trade agreement and since Australia is the key market for us, is there any benefit which will accrue to AI because of this agreement.

Sanjay Majmudar

Well actually this free trade agreement is an additional feature, we are in the process of examining it but the development that we do with our client is actually agnostic to any further benefit that we may get out of an FTA. So, very honestly, we have not really considered weighing those benefits but there would be some incremental benefit but the point I am trying to make is that we are agnostic to FTA whether there is anFTA or not that benefit itself can be translated on a one-to-one bilateral basis. Like Australia for example, it goes the duty at 4, it goes to 0 in 4 years. So, there is so

Sir, just one question, you said two things on freight firstly on the existing operations you have been able to pass it on to customer on a very regular basis and it is reflecting in margin and secondly for new customers you are saying this was a hampering factor for conversion, so let’s say when you talk about 30-40 KT of new volumes next year. Should we assume that to start off with you will have discounts to cover the freight just to ensure conversions and then later on you will be able to pass it on to customers and margins recoup for the new customers specifically.

Kunal Shah

No, I do not think so. See what has happened that as you mature and as your position becomes more and more consolidated this kind of very fine maths. Yes, it is a very simplistic question, real life there will be may other variables that may be beyond just the freight cost, right? We are saying that high freight is a reality for the medium term, near-medium. We have created a model around it and we have been able to pass it own with a lag. Ever concept saying using pricing is not a preferred right rather focus on value addition and then demonstrate and that and work harder on it. product makes

Sanjay Bhai and Kunal Bhai congratulations, very good set of numbers. Just on to the previous question when eventually the shipping issues resolved in the medium term. Then this, 25,000- 30,000 tons that could have happen that could be additional. Is that the correct understanding?

Kunal Shah

It comes with that metrics, right? This is again a directional answer right, Sujith Bhai. We are finally going from saying, we are worried, this that COVID to say it looks like the back to growth. Allow us a few we will have much more direct clarity as we are going, right? 30-40 is a good number to start with the target and we hope we do more but idea is to keep doing that for a longer period and that is what the focus is right now. We do 10,000 tons or 20,000 does not change the needle because we want to become half a million tons in next five years for example, right? That is the direction,

Sir my first question is on the mill liner side as you mentioned here you must be adding 50,000 capacity. Just wanted to understand how big this market is what is the competitiveness and who are the leaders now and where does AIA would be aiming to 3-4 years in this space?

Sanjay Majmudar

So, the total additional capacity that we are creating is about 50,000 tons and the market as we have already explained earlier of mill liners could be anywhere in the region of 300,000 tons, we are already doing about 20,000 tons. So, we should find a detail traction going forward based on whatever indication we are getting from the sale. So, how much would be the current market share or any competency in this space? So, there are major global players who are already active in this. They are all key global players with whom we are competing but we are pitching on unique design platform based

Alright thank you everyone for joining the call as usual Sanjay Bhai and I remain available for any offline questions that one may have. Thank you so much and have a good evening.

Management

Speaking time

Kunal Shah

Moderator

Sanjay Majmudar

Ravi Swaminathan

Ashutosh Tiwari

Sandeep

Amit Anwani

Bhavan Vithlani

Priyankar Biwas

Ritesh Chedda

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Opening remarks

Kunal Shah

A very good evening to all of you. Thank you for joining the call. I have Sanjay bhai with here with me. This is Kunal and I hope you all got a chance to look at our numbers but neverthelesswe will give you a quick summary on numbers, share a bit of the update on the market and we will get into Q&A. We are happy that this will be our, we crossed the 1000 crores mark in a quarter, first time in history and we are very happy about it. We have done Rs.180 crores of revenue in the quarter and that came from about 73, 000 tons of sales and 70,000 tons of production in this quarter. We ended the full year with 260,500 tons that is down from 266,000 tons that we did full year, last year. This volume figure is in light of 40,000 tons that we have approximately lost on account of reduction in sales in Canada and South Africa. So, optically while it looks like a small reduction in real sense, we have added more customers to the tune of about 30,000 tons for the full year and this in a year where

Sanjay

Thank you very much. Thanks Kunal for detail briefing and I think while Kunal has covered most of the points, 2-3 very important key takeaways that we have even at a cost of being slightly repetitive, one demonstration of the ability to pass on,almost on 100% basis all the cost increases that has been further continued and strongly established by the fact that there is a significant improvement in the realization both the cost of raw materials plus the cost of weight has been nearly 100% pass on and that processes of passing on continues. So, which is good sign and therefore there is a significant reflection in reasonably strong profit numbers that the company has posted in the quarter and the year ended March 2022 that is point number. Resumption of the CAPEX plan at a slightly elevated capacity of about 80,000 tons Brownfield expansion for the grinding media as announced in the board and therefore as discussed by Kunal at a outlay of close to Rs.200 crores to be completed over next c

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