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Margin underperformance

Triveni Turbine’s (TRIV) 1QFY27 performance was significantly below our estimates due to a lower-than-expected margin performance. EBITDA margin was impacted by delays in export shipments and low-to-zero margins in a strategic NTPC order for CO2-based energy storage. Order inflows have started ramping up for the company from both domestic and export markets, with inflows of INR5.7b, up 6% YoY. The domestic enquiry pipeline is weak, while export and aftermarket pipelines are building up. We expect TRIV to also benefit from combined cycle projects from US data centers in the next one year. We cut our estimates by 17%/7% for FY27/28E to bake in lower margins for 1HFY27 and arrive at a revised TP of INR680, based on 40x two-year forward estimates. Retain BUY. We expect margins to remain muted until the completion of the low-margin strategic order from NTPC, though we expect margins to improve from 2HFY27 as execution ramps up for the export and aftermarket order books

In-line revenue, miss on profitability

TRIV reported in-line revenue, while EBITDA and PAT came in below our estimates. Revenue grew 19% YoY to INR4.4b, broadly in line with our estimate of INR4.2b. Domestic revenue grew 27% YoY to INR2.4b, whereas exports grew 11% YoY to INR2b. Product revenue increased 19% YoY to INR3b, whereas aftermarket revenue grew 19.5% YoY to INR1.4b. Gross margin contracted YoY to 42.6%. While the moderation was anticipated, the margin was 190bp below our estimate of 44.5%. Lower-than-expected gross margins, coupled with higher-than-expected other expenses, resulted in an EBITDA margin of 11.6%, below our estimate of 16.5%. Margins were impacted by an unfavorable mix and certain ongoing strategic orders. Absolute EBITDA fell 30% YoY to INR513m vs. our estimate of INR697m. Lower margins led to PAT missing our estimate. PAT decreased 21% YoY to INR511m, 16% below our estimate. Order inflows increased 6% YoY to INR5.7b, taking the closing order book to INR21.8b.

Domestic demand soft

Domestic revenue grew 27% YoY to INR2.4b, although domestic order booking declined 35% YoY, indicating near-term softness in the market. The weakness in order finalization has been broad-based across industries, with customers adopting a wait-and-watch approach and longer gestation periods. Domestic inquiry levels also softened. Given the 6-12-month gestation period for product orders, the recent decline in inquiries is likely to affect order finalizations with a lag. The company expects domestic demand to show signs of recovery in the coming months. We expect domestic revenue/order inflows to clock 21%/18% CAGR over FY26-29.

Exports remain a key growth driver

Export revenue grew 11% YoY to INR2b in 1QFY27, while export order booking increased 53% YoY and accounted for 68% of total order intake vs. 47% in 1QFY26. Export order booking remained strong across Southeast Asia, Africa and Europe, with traction particularly visible in biomass, waste-to-energy and conventional applications. Export orders accounted for 57% of the INR21.8b closing order book as of Jun’26, supporting visibility for execution. However certain export dispatches were deferred by one to two quarters as freight rates increased by 3x-4x and vessel availability tightened, resulting in some revenue recognition shifting from 1Q to 2Q/3QFY27. International inquiry generation also remains healthy, primarily in the US, South East Asia and Europe. Europe is only showing early signs of improvement, while North Africa, SAARC and the Middle East remain weak. We expect export growth to be supported by the strong order pipeline and improving geographical diversification. We expect a CAGR of 15%/22% in export revenue/order inflows over FY26-29.

Financial outlook and valuation

We cut our estimates by 17%/7% for FY27/28E to bake in lower margins for 1HFY27 and thus, expect TRIV’s revenue/EBITDA/PAT to clock a CAGR of 18%/18%/19% over FY26-29. The stock is currently trading at 55.7x/39.9x/31.6x on FY27/FY28/FY29E EPS. We arrive at a revised TP of INR680 (earlier INR750), based on 40x two-year forward estimates. Retain BUY.

Key risks and concerns

Slowdown in capex initiatives; intensified competition; technology disruption; inability to innovate and launch new products; and geopolitical headwinds resulting in a sharp slowdown in exports and aftermarket segments.

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