AIA Engineering mining conversions and NGDS trials underpin volume-led earnings growth

Investment View and Valuation

ICICI Direct Research’s August 13, 2026 result update retains a BUY recommendation on AIA Engineering, supported principally by the potential conversion of mining trials into commercial high-chrome grinding-media orders and the longer-term opportunity from the New Generation Discharge System (NGDS).

ICICI Direct values AIA Engineering at 35 times FY28E EPS and sets a target price of Rs 5,225 per share, compared with the CMP of Rs 4,430. The company is described as India’s largest manufacturer and supplier of high-chrome wear, corrosion and abrasion-resistant castings for cement, mining and thermal-power plants, and the world’s second-largest hi-chrome producer.

Its product portfolio includes tube-mill internals such as grinding media, shell liners and diaphragms, as well as HRCS castings and crusher parts.

Q1FY27 Financial Performance

AIA Engineering reported Q1FY27 revenue of Rs 1,168 crore, up 12.4 per cent year on year. Sales volume increased 7.5 per cent to 64,644 MT, while realisation improved by about 4.5 per cent year on year. Gross margin declined to 61.20 per cent from 62.26 per cent in Q1FY26. EBITDA was broadly flat at Rs 308 crore, increasing 0.5 per cent year on year, while EBITDA margin fell to 26.4 per cent from 29.5 per cent. PAT declined 1.3 per cent to Rs 301 crore.

The margin pressure reflected an unfavourable product mix, a lower contribution from value-added products, higher freight costs and incremental customer-trial expenses. The order book stood at Rs 977 crore as of July 1, 2026.

Mining Volumes and Conversion Pipeline

Mining volume was 39,228 MT, up 7.8 per cent year on year and representing 61 per cent of total volume. Other volumes were 25,416 MT, up 7.0 per cent. Management attributed the sequential decline in mining volume to timing, product mix and order-execution cycles rather than structural demand weakness.

Q1FY27 realisation was about Rs 180 per kg. However, management retained its indicative Rs 160-165 per kg range because product mix, raw-material costs, freight, currency and customer buying cycles affect realisation.

The key earnings driver identified by ICICI Direct is the commercial conversion of ongoing mining trials, particularly in Latin America. The Rs 300 crore Chile high-chrome grinding-media order received in October 2025 is progressing well and contributes about 3,000-4,000 MT each quarter. Its execution has generated enquiries from adjacent mines.

AIA Engineering has installed capacity of 4.36 lakh TPA and utilisation of about 65-70 per cent, providing headroom to meet incremental demand without immediate major capacity constraints. ICICI Direct forecasts volume growth of 9 per cent over FY26-FY28E to about 3,05,000 tonnes.

NGDS Opportunity and Market Position

Management said NGDS trials and South American mining conversions remain under way. NGDS combines grinding media, liners and the discharge system to improve mill throughput and recovery. Smaller-mill trials have succeeded, while medium- and large-mill trials require further iterations and may take three months to two years depending on mine-site conditions.

Commercialisation in larger mining mills could broaden AIA Engineering’s addressable market and reinforce its high-chrome grinding-media position. Management does not see significant Chinese competition in high-chrome grinding media because the business requires customised solutions and front-end application engineering.

Margins, Costs and Capacity Expansion

Management expects operating margin, currently about 26-28 per cent excluding other income, to normalise to 20-22 per cent as volumes scale and the grinding-media mix rises. Freight and shipping remain near-term friction points, although freight rates are showing signs of moderation. Higher ferro-chrome and steel-scrap costs are being passed through to customers, limiting their direct effect on realisations.

AIA Engineering raised FY27 capex guidance to Rs 350-400 crore. This includes Rs 170-200 crore for a corporate house and Rs 50-100 crore for land for potential future brownfield or greenfield expansion.

ICICI Direct Financial Forecasts

Key Risks

• Delay in the conversion of mining trials to high-chrome grinding-media orders.
• Increases in input or freight costs that could affect business growth.