Add Triveni Turbine Ltd For Target Rs. 319 - Yes Securities
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Robust quarter; exports shaping up well
Our view
Triveni Turbine (TRIV) reported healthy performance on account of execution ramp up and strong export sales (up 93% YoY). EBITDA Margins contracted ~30bps YoY owing to certain costs (Rs113.6mn) associated with the execution of a large order in SADC region. Order inflows came in at a record Rs3.6bn (up 17% YoY) led by strong growth in export markets (up 118% YoY) at Rs1.8bn while domestic OI de?grew by 19%. Order book remains strong at ~Rs11.4bn (1.1x TTM revenue), providing revenue visibility for FY23. Enquiry pipeline remains strong in export markets like SE Asia, Europe, North America, West Asia, etc from sectors such as process industries, WTE, WHRS, municipal solid waste, IPP, renewable energy, etc.
We believe, 1) company’s strong margin profile, 2) lean working capital, 3) healthy cash flows, balance sheet and 4) long term growth prospects (~diversification in new types of turbines) will support its valuations and future projections. Given strong enquiry pipeline, management`s focus on cost rationalization and improving operational efficiency, we expect the company to generate revenue/PAT CAGR of 25%/59% from FY22 to FY25E. The stock is currently trading at 50.1x/35.3x/31.3x FY23E/24E/25E EPS. With the recent run?up in the stock, we downgrade it to ADD (from BUY) with a revised TP of Rs319 valuing it at 40x FY24E EPS of Rs8.
Result Highlights
* Consol sales (highest ever) came in at ~Rs2.9bn (up 42% YoY) (vs YSLe Rs2.7bn) led by improvement in execution.
* With softening commodity inflation, gross margins came in at 46.7% Vs 44.4% in 2QFY22 and 43.1% in 1QFY23. ? EBITDA increased by 39% YoY to Rs557mn (YSLe Rs553mn) with EBITDA margins at 19.0% (~30bps YoY contraction/~20bps QoQ expansion)
* Adj PBT grew by 62% YoY to Rs614mn on the back of higher other income (up 38%).
* Adj PAT came in at Rs463mn; up 66% YoY partly due to a lower effective tax rate.
* The Board of Directors has approved a proposal (subject to shareholder approval) to buy back equity shares worth Rs1.9bn at a price of Rs350/share. This represents 1.68% of the total number of paid?up shares as on 31 March 2022.
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