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AIA Engineering Ltd. is on track to deliver ~30,000 tonne incremental volumes (in line with management guidance) each year in FY23 and FY24, led by steady demand, likely gradual easing of logistics issues and capacity expansion.
Company has recently entered into a non-exclusive agreement with SAL Steel Ltd. for supply of key raw material ferro-chrome for three years. The deal is likely to result in increased supply of ferro-chrome from the domestic market (currently ~15% of the requirement is imported).
As per our channel checks, volumes from Canada and South Africa are also likely to show improvement in FY23.
AIA Engineering is endeavouring to increase its market share on the back of its capability to offer customised solutions, improved product basket and easing of logistics issues.
With the recent decline in commodity prices, we expect blended realisations to moderate though Ebitda margin is likely to remain intact. Strong business moat, credible management and robust balance sheet give us comfort on the company.
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