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Rising energy demand to drive growth...

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

• Strong execution in the aftermarket segment and higher sales from the international market aided TTL to report robust topline growth of 32% in Q2FY24 and 38% YoY in H1FY24.

• Gross margin improved by 241bps YoY to 49.1%, due to favourable product mix & higher exports. The EBITDA margin improved by 18bps YoY to 19.2%, due to a drop in staff costs.

• The order book for Q2FY24 increased by 30% YoY, supported by 27% YoY growth in new orders in H1FY24.

• A 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, is expected to support demand for heating and cooling solutions in the medium term.

• However, expensive valuations remain a near-term concern. We therefore reiterate Accumulate rating and value the stock at a P/E of 40x on FY25E EPS with a TP of Rs. 437.

Execution picked up…

TTL registered a highest ever quarterly revenue growth of Rs 388cr in Q2FY24, a growth of 32.4%. In H1FY24, top-line registered a robust growth of 38.4% YoY aided by higher export revenue (36.3% YoY), driven by the company’s success in international markets especially in the aftermarket segment. While domestic business increased by 29.3% YoY to Rs212cr. The product segment and after market business witnessed a growth of 24% YoY and 81% YoY, respectively in H1FY24. Gross margin in H1FY24 improved by 540bps YoY to 50.3%, aided by a favourable product mix. While EBITDA margin was flat at 19%, impacted by higher other expenses. We expect that higher execution of export orders and increased aftermarket sales will support margins going forward.

Order book grew by 30% YoY...

In Q2FY24, the order book grew by 30% YoY to Rs. 1,476cr (which is 1x TTM revenue), aided by 27% YoY growth in order inflow in H1FY24. During H1FY24, export order inflow registered a healthy growth of 56% YoY to Rs443cr while domestic order inflow grew by 8% YoY to Rs 469cr. Most of the order intake in the domestic market came from sugar, distillery, food processing, pulp and paper, chemicals, and waste heat recovery. The industrial clients remained the major contributor to TTL’s orders, it was the renewable energy (RE) independent power producers (IPP) segment in this space that led to a higher enquiry base. The share of the export order book remained healthy at 43% in H1FY24. The increasing share of export order book would aid profitability in the coming quarters.

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 reiterate Accumulate rating and value the stock at a P/E of 40x on FY25E EPS with a TP of Rs 437.

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