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Decent quarter; strong outlook

Our view

Triveni Turbine (TRIV) reported healthy performance on account of better sales mix and execution ramp up. EBITDA Margins contracted ~64bps YoY owing to commodity pressures. Order inflows came in at Rs3.6bn (up 31% YoY) led by strong growth in domestic markets at Rs2.5bn while export OI grew by 44%. Order book remains strong at ~Rs10.7bn (1.2x TTM revenue), providing revenue visibility for FY23. Enquiry pipeline remains strong in both domestic and exports from sectors such as food processing, pharma, cement, sugar, oil & gas, steel, etc. Going forward, management expects margins to be in the region of ~20% and guided for 30?35% FY23 revenue growth.

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%/29% from FY21 to FY24E. The stock is currently trading at 35.3x/28.3x FY23E/24E EPS. We maintain our BUY rating on the stock with a TP of Rs273 valuing it at 40x FY24E EPS of Rs6.8.

Result Highlights

* Consol sales (highest ever) came in at ~Rs2.59bn (up 41% YoY) (vs YSLe Rs2.63bn) led by improvement in execution.

* Due to input cost pressure, gross margins came in at 43.1% Vs 45.7% in 1QFY22 and 44.5% in 4QFY22.

* EBITDA increased by 36% YoY to Rs487mn (YSLe Rs483mn) with EBITDA margins at 18.8% (64bps YoY contraction/107bps QoQ expansion) despite lower gross margins.

* Adj PBT grew by 39% YoY to Rs508mn on the back of higher other income (up 34%).

* Adj PAT came in at Rs383mn; up 18% YoY led by better operating performance.

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