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Triveni Turbine (TRIV), a renowned player in the 0-30MW industrial steam turbines, enjoys leadership position in India (50% market share) and is the second largest globally (20% market share). Technology driven, customized and engineered product offering gives it a key edge, ably supported by large exports (43% of total sales over FY16-22) and highly profitable after-market services (25% of total sales over FY16-22). This aided TRIV to maintain superlative financial metrics over the past decade despite domestic capex slowdown, which impacted growth (less than 3% CAGR in revenue/PBT over FY13-22). The order inflow momentum has seen a sharp upsurge since FY22 led by revival in industrial capex in India, rising renewable & WTE capex in Europe, and process co-gen & biomass driven capex in South East Asia. The renewed capex cycle will act as a key catalyst for TRIV’s growth (FY22-25E revenue/earnings CAGR at 24%/56%), further accentuating its superior financial franchise. We initiate coverage on TRIV with a BUY rating and a Target Price of Rs315 based on 40x H1FY25E EPS.

Superlative financial metrics sustained over the past decade despite capex slowdown

TRIV has seen sustained superlative financial metrics over FY13-22 with high margin profile (45.4%/20.7% avg. gross/EBITDA margin), robust return ratio (36.5%/35.4% avg. RoE/RoCE), strong cash flow (aggregate OCF/EBITDA at 97%, FCF/OCF at 79%, FCF/sales at 16%) and low NWC (at 8% of sales; due to 15-25% customer advances) despite a sharp slowdown in domestic capex, which led to ~3% CAGR in revenue/PBT over FY13-22

Robust revival in order inflows a key growth catalyst

Healthy capex revival in domestic market has been instrumental in sharp upsurge in TRIV’s order inflows. TRIV’s order inflow jumped to Rs11.8bn in FY22 (Rs7.1bn domestic and Rs4.7bn exports) vs. an avg. annual inflow of Rs7.7bn (Rs4.1bn domestic and Rs3.6bn exports) over FY16-21. We expect 14% CAGR in order inflows over FY22-25E led by strong capex momentum in India (cement, steel, process co-gen, biomass and distilleries sectors), Europe (renewables & WTE) and South East Asia (biomass & process-cogen).

New growth avenues of 30-100MW turbines, API turbines and global REFURB

(1) The global 30-100MW market has become a new large opportunity for TRIV with market size of 7GW, 1.5x of 0-30MW, with Europe and South East Asia (3GW market) being key focus areas. (2) API turbines (used at refineries to drive pumps, compressors, etc.) offer a large opportunity, wherein TRIV has received certifications and approvals from global and Indian consultants(~10% of order book currently). (3) Triveni REFURB brand’s overseas expansion in refurbishment of old turbines and servicing of larger utility turbines can aid growth & margin. TRIV won Rs1bn order in 1QFY23 from South Africa.

Initiate coverage with a BUY rating and target price of Rs315

Over FY16-22, TRIV has traded at an avg. P/E of 35x. With rising industrial capex in India, strong growth expectations (FY22-25E revenue/earnings CAGR of 24%/56%), and superlative financial profile, we believe TRIV can command a 15% premium. We assign 40x H1FY25E EPS to TRIV and initiate with BUY rating and a target price of Rs315.

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