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Execution picked up...

Triveni Turbine Ltd (TTL) is the domestic market leader in steam turbines up to 30 MW. The company designs and manufactures steam turbines up to 100 MW, and delivers robust, reliable, and efficient endto-end solutions.

• In Q1FY24, TTL reported a better than expected top-line growth of 45% YoY , driven by strong aftermarket revenue growth of 91% YoY, while product sales grew by 29% YoY.

• Gross margin improved by 841bps YoY to 51.5%, due to favourable product mix. While EBITDA margin was flat at 18.8%, due to higher other expenses and staff costs.

• Order book for Q1FY24 increased by 31% YoY with strong demand from Sugar, Distillery, Steel, Independent Power Producers, Oil & Gas.

• Higher mix of export orders will bode well for TTL’s ability to increase international market share and contribute to a higher margin profile.

• Rising global energy demand particularly in the industrial segment are expected to support demand for heating and cooling solutions in the medium term.

• However, valuation remains expensive due to the recent uptick in price. We assign Accumulate rating and value the stock at a P/E of 40x on FY25E EPS with a TP of Rs. 430.

Highest ever quarterly revenue…

TTL registered a highest ever quarterly revenue growth of Rs 376cr in Q1FY24, a robust growth of 45.3%. The domestic sales increased by 19.8% YoY to Rs195cr while export revenue registered a healthy growth of 88.2% YoY to Rs182cr, driven by the company’s success in international markets especially in the aftermarket segment. The mix of domestic and export sales improved in favour of exports from 63:37 in previous corresponding quarter to 52:48 in Q1 FY24. Gross margin in Q1FY24 improved by 841bps YoY to 48.5%, aided by a favourable product mix. While EBITDA margin was flat at 18.8%, impacted by higher other expenses (143% YoY) and employee costs (40% YoY). We expect that higher execution of export orders and increased aftermarket sales will improve margins going forward.

Order book remains healthy...

In Q1FY24, the order book grew by 31% YoY to Rs. 1,405cr (which is 1x TTM revenue), supported by strong demand from Sugar, Distillery, Steel, Independent Power Producers, Oil & Gas. During the quarter, order inflow increased by 27% YoY to Rs453cr, supported by aftermarket orders with a growth of 43%YoY, while product order inflow increased by 20% YoY to Rs308cr. The share of the export order book remained healthy at 43% in Q1FY24. The increasing share of export order book would aid margin improvement in the coming quarters. The aftermarket contributed to 32% of order booking for the year, up from 21% in FY 22, and the Company is confident that this segment will continue to provide a significant share of its overall growth in the coming years.

Valuations

Rising global energy demand particularly in the industrial segment are expected to support demand for heating and cooling solutions in the medium term. However, expensive valuation remains a deterrent in the near term performance. Therefore, we assign Accumulate rating and value the stock at a P/E of 40x on FY25E EPS with a TP of Rs 430.

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