This company manufactures “grinding media” or what company calls as High Chrome consumable wear parts. These parts are typically used in Cement & Mining industry and the company has presence in more than 90 countries (as per 2013 AR). Practically any cement company that we might have ever heard of is a client of AIA.Worldwidethere are only 2 major players AIA & Magotteaux making this product. AIA is no. 2 with a capacity of 2,60,00 tonnes behind Belgium based Magotteaux. Rest of the industry players are very small &insignificant. AIA has 90% market share in the domestic cement sector and a 25% market share globally.
While the cementindustrymostly uses these High Chrome Consumable wear parts already. It’s the mining industry which is now beingtargetedby AIA. Mining industry currently uses forged media, which costs 20% lesser than High Chrome media. But high chrome media presents someefficiencyover the forged media.
Value Research puts the opportunity like this
“High chrome mill internals are fast replacing the traditional forged internals used in the mining sector which has a demand of at least 1.2 million tonnes per annum. The high chrome mill internals are estimated to have covered only 20 per cent of the mining demand. According to ICICI Securities, this could create an additional demand that is four times the cement consumption of high chrome mill internals of 300,000 tonnes per annum. AIA’s increased focus in this field has seen the share of mining sector rise from 18 per cent in FY10 to 54 per cent in the nine months ended December 2013”
Another point is about margin expansion possibility in the Mining Sector. Company maintains, it followed a discounted entry pricing to capture mining customers in the initial years. However, with passing time, company expects to resort to normal pricing, hence enabling better margins.
Company did brownfield expansion from 2,00,000 tonnes to 2,60,000 tonnes in the FY14. Estimates to sale 2,10,000 tonnes in FY14 - that’s a 18% growth in volume over FY14.
Company also has started working on a greenfield expansion of 1,80,000 tonnes to take total capacity to 4,40,000 tonnes. Expected completion date for it is by H1’2016.
Planned expenditure for the greenfield expansion is 650 cr. and company is currently sitting on cash balance of about that much. So no need of debt for expansion.
CMP : 753,Mcap : 7108.81 cr. , TTM Net Profit is 324.96 cr. PE: About 22 times on trailing basis.
Good Links to read
Please help with your views.
Disclosure: Invested from lower levels and might accumulate more.
To follow is this Qtr’s conf. call details, stay tuned