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Strong order book provides visibility....

Strong order book provides visibility... 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

• TTL reported a robust revenue growth of ~41% YoY in Q1FY23, led by strong export sales of 59% YoY, while domestic sales grew by 32% YoY.

• However, gross margin declined by 266bps YoY to 43.1% due to higher commodity prices. EBITDA margin declined by 64bps YoY to 18.8%.

• The order book grew by 47% YoY, supported by a 31% YoY increase in order inflow in Q1FY23, which adds revenue visibility in coming quarters.

• Aftermarket segment registered 81% growth in order inflow. The orders are mainly for servicing large utility steam turbines in the South African Development Community (SADC) region.

• TTL’s entry into the API segment and turbines of more than 30MW with increasing export orders would aid the profitability going forward.

• Therefore, we reiterate our Accumulate rating and value the stock at a P/E of 33x on FY24E EPS with a TP of Rs. 220.

Order pipeline remain strong...

Order pipeline remain strong... In Q1FY23, the order book grew by 47% YoY to Rs. 1,096cr (which is 1.2x TTM revenue), supported by 31% YoY increase in order inflow. During the quarter, export order book increased by 117% YoY, while domestic order book grew by 20% YoY. The increasing share of export order book would aid margin improvement in the coming quarters. In the product segment, order inflow grew by 18% YoY to Rs 256cr, while inflow in aftermarket segment increased by 81% YoY to Rs 102cr. During the quarter, TTL won a significant order of Rs. 100cr for servicing large utility steam turbines in the SADC region. While margins for this order are lower, and the management is taking this as an opportunity for TTL to garner more aftermarket business with customers such as spares and refurbishment and generate references for similar future opportunities in the aftermarket space for its utility turbines globally. The company will expand its capacity from 160 turbines to 220-250 turbines by Q3FY23. This will enable TTL to cater 30–100MW and above 100MW refurbishment orders. The management sees strong opportunities in process industries, co-generation, IPP, and waste management in domestic and international markets

Execution picked up pace…

Q1FY23 top-line registered a robust growth of 40.7% to Rs 259cr (in-line with our estimate) supported by 59% YoY increase in export business, while domestic business increased by 32% YoY. Revenue from products increased by 44% YoY to Rs 191cr, while aftermarket revenue increased by 34% YoY to Rs 68cr. The management expects execution to pick up pace and to generate 35% top-line growth in FY23. EBITDA margin declined by 64bps YoY to 18.8% due to higher commodity prices. We expect that with higher execution of export orders and increased aftermarket sales would improve margins going forward. Adj. PAT grew by 38% YoY to Rs 38cr led by better operating performance and other income

Valuations

Robust order inflow, pick up in execution and TTL’s foray into energy efficient API turbine for oil & gas industry will support the premium valuation. The company is currently undertaking capital expansion and gearing up its supply chain and sales network to drive future growth. We expect the long term story remain intact and reiterate our Accumulate rating and value TTL at a P/E of 33x on FY24E EPS with a TP of Rs 220.

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