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Strong quarter; Buoyant growth outlook sustained

Triveni Turbine (TRIV) posted highest ever consolidated sales at Rs3.3bn, up 45% YoY and 10% above our estimate. Exports jumped 123% YoY to Rs1.4bn on a low base, while domestic sales grew 14% YoY to Rs1.9bn. Gross margin expanded 390bps YoY and 190bps QoQ to 48.6%. Other expenses were higher by 106% YoY to Rs619mn due to Rs252mn subcontracting charges of after-market utilities turbine orders in SADC region. EBITDA grew 40% YoY to Rs631mn with an operating margin of 19.4%, down 60bps YoY, but exactly in-line with our estimate. PAT grew 47% YoY to Rs526mn and was above our estimate of Rs451mn. Rising trend witnessed in order inflow over the past 6 quarters continued and remained healthy in 3QFY23 at Rs4.2bn, up 31% YoY and 17% QoQ. Order book stands at highest ever level of Rs12.3bn, up 8% QoQ. Despite high base of FY23E inflows (~Rs15bn), high-teens growth will continue over the medium term of 2-3 years based on enquiry pipeline and capex trends while PBT margin of +20% will be sustained. We increase our EPS for FY23E by 4% while estimates remain broadly unchanged for FY24E/FY25E. Retain BUY with an unchanged target price of Rs345 based on 40x H1FY25E EPS.

Domestic market update: Domestic sales grew 14% YoY to Rs1.9bn, 57% of total sales. Order inflow was healthy at Rs2.3bn (average of past six quarters at Rs2bn). However, domestic enquiries fell 5% YoY largely driven by temporary slowdown in metals industry. TRIV expects robust order booking in the domestic market to continue, driven by sectors such as distilleries, pharmaceuticals, chemicals, cement WHR and process co-generation. Domestic inflows in FY24 are likely to be higher than FY23. For API turbines, TRIV is has technical and regulatory approvals for the domestic market, where government capex on fertilizers and petrochemicals will enhance the addressable opportunities. Domestic order book rose 7% QoQ to Rs6.9bn

Exports market update: Exports sales jumped 123% YoY to Rs1.4bn (43% of total sales) on a low base. Order intake from international markets were healthy at Rs1.9bn vs. past six quarters’ average of Rs1.3bn. International enquiries were higher by 55% YoY and were broad based across South East Asia, Europe, West Asia and North America. Sectors driving growth were renewable, IPPs, WTE and processed industries. Europe forms 30% of the total enquiries where the pace of new order booking is rising due to thrust on energy security. Exports order book is up 10% QoQ to Rs5.4bn.

Aftermarket update: Booking of SADC turbine order led to spurt in after-market sales (+119% YoY to Rs1.3bn) and inflows (+130% YoY to Rs1.1bn). After-market share in total sales rose to 39% in Q3 due to SADC order, but will normalize to 30% in FY23E. Enquiry pipeline remains strong for spares and refurbishment. TRIV is exploring opportunities in SE Asia, Europe and North America for local talent/presence for SADC-type orders.

Maintain Buy with unchanged target price of Rs345 We expect TRIV to register 29%/33% revenue/adj. EPS CAGR over FY22-25E. Strong growth amid rising industrial capex, and superior financial profile will support valuation

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