AIA Engineering Charts Future Stability and Growth

Ashwin Thakker

— 2 min read

Key Facts on Outlook:

  • Volume guidance for FY26: Expected to be "near flat" (between -5% and +15%).
  • Volume guidance for FY27: Anticipates a return to a "decent level of volume growth" with "complete clarity."
  • Operating Margin Outlook: Expects normalization to a sustainable 23-24% minimum, following an "abnormal" Q1 FY26 margin (40.46% EBITDA, ~29-30% operating).
  • Power Cost Reduction: Aims for almost 55% of power from green sources this fiscal year, with power and fuel costs projected to reduce to 6-6.5% of sales in 1-2 years.
  • Strategic Investments: Progressing with new plants in China and Ghana; targeting updates in the "next 1 or 2 quarters."
  • Trade Dynamics: Brazil CVD reduced from 6.5% to 2.9%; US tariffs (9.8-10.07% antidumping plus 50% reciprocal tariff) are under discussion, but supplies continue.

AIA Engineering Limited's Q1 FY26 earnings call revealed a nuanced outlook. While the company projects a "near flat situation" for volumes this fiscal year, strategic initiatives are firmly in place for substantial growth in FY27. Investments in green energy, new plants in China and Ghana, and a focus on high-margin solutions underscore a forward-looking strategy despite current market dynamics.

FY26 Volumes and Market Dynamics

AIA Engineering's Q1 FY26 sales volumes were flat. Management projects a "near flat situation" for FY26, with volumes expected between -5% and +15%. Brazil's CVD component reduced from 6.5% to 2.9%, offering "big relief." Discussions continue on US tariffs, though customer supplies are maintained. The company is "bullish on the prospects of conversion" to high chrome solutions for mining clients, anticipating "quite a bit of conversion-related news to start coming in the coming quarter," aiming to drive future volume.

Strategic Investments and Margin Outlook

AIA Engineering anticipates a return to "decent level of volume growth from the next fiscal" (FY27). This is underpinned by strategic investments in new plants in China and Ghana, with updates on land and approvals expected in "next 1 or 2 quarters." INR100 crores is allocated for other capex and renewables this year. The company aims for almost "55% of our power will come from green sources" this fiscal year, projecting power and fuel costs to reduce to 6-6.5% of sales in 1-2 years. While Q1 FY26 saw "abnormal" margins (40.46% EBITDA), management targets a sustainable long-term operating margin of "23%, 24% as a minimum," with normalization within two quarters.

AIA Engineering projects a stable FY26, emphasizing strategic investments in new plants and green energy for future growth. Despite current volume flatness, the company is confident in returning to significant growth by FY27, backed by conversion efforts and margin normalization. These initiatives position AIA for sustained performance and long-term value creation.

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