AIA Engineering: Export data analysis – volumes on track

25 Apr 2023 , 10:43 AM

Recommendation: Buy

Target Price: Rs 3,011

 

M11FY23 export volumes for cast grinding media from India were flat YoY at ~171kt. Considering ~63-75% correspondence with AIAE’s annual volume historically, analysts of IIFL Capital Services are comfortable on their FY23 volume estimate of ~295kt. They expect support from liner volumes from new facility and healthy non-mining demand domestically. Moderation in export realizations should reflect for AIAE too. But given rising RM costs, this would be limited in the near term.

Export volumes flat in 11MFY23; liners, non-mining to support growth: 

Recently released Feb’23 export data cast grinding media implies that M11FY23 volumes have been flat YoY at ~171kt. Over the past eight years, India export volumes constituted 65-70% of volumes reported by AIAE and was 66% over M9FY23. Extrapolating 11MFY23 data for the full year, the company seems largely on track to meet its guidance of 35kt incremental volumes in FY23, with implied Q4 volume at ~78kt. Incremental volumes from mill liners (from recently commissioned facility) and healthy non-mining volumes (led by domestic cement and coal volumes) would support this as well.

Mixed trends seen in country-wise exports: 

Over M11FY23, exports to Australia, Mexico and Ghana (among the top 10 countries) declined by 20%, 13% and 13% respectively. However, this was offset by healthy growth for USA (20%), Brazil (14%), Canada (38%), Tanzania (48%) and Guinea (33%). Singapore was a surprising new destination with 6,162t of exports, while Russia saw a sharp 272% jump. Traction in Chile is yet to pick up with small 1,688t of volumes.

Realizations softer, mostly stable from here: 

FY22 and M9FY23 saw sharp jump in realizations for AIAE, as RM and freight cost hikes were passed on to customers. Export realizations have moderated in Q4 and this should reflect in AIAE’s realization as well. But given the rise in costs of both key raw materials, further moderation would be limited. Freight rates continue to fall, which would be passed on, but would also augment volume traction as new customer conversion becomes easier.