Triveni Turbine Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Triveni Turbine Ltd (TRITURBINE) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:12:30] Himanshu Upadhyay of o3 Wealth asked about the aftermarket business, if doubling of revenues in 3Q was due to a one-time order or anything else. Nikhil Sawhney MD said these sustainable orders will continue to grow over time, but the product side of the business is also growing strongly. While the yearly percentage of aftermarket revenue will likely be around 30% or more, the aftermarket segment is expected to grow faster than the product segment.

• [00:15:15] Himanshu Upadhyay from o3 Wealth enquired why the aftermarket growth is slower than product growth in the capital goods industry. Nikhil Sawhney MD answered TRITURBINE has three product segments: below 30 mw turbines, above 30-mw turbines, and aftermarket. TRITURBINE’s order book grew over 20% YoY, with aftermarket growing by over 130%. Refurbishment is growing due to strategy of localized presence in international markets.

• [00:20:22] Kunal Sheth at B&K Securities queried what’s causing the domestic market slowdown if it’s transitional. Nikhil Sawhney MD replied that quarterly enquiries are strong, with formal proposals indicating serious interest in bankability. Municipal solid waste incineration, cement waste heat recovery, and chemical process co-generation are strong segments. Optimism exists for increased government expenditure leading to higher capital formation in PSUs. Despite a temporary decrease in enquiries, overall numbers are expected to exceed the current year.

• [00:22:35] Kunal Sheth at B&K Securities asked how cooling energy costs in Europe impacted business and customer discussions regarding exports. Nikhil Sawhney MD answered they’re speeding up their energy transition due to uncertain costs, becoming self-sufficient and shifting to decarbonized generation. TRITURBINE’s biomass IPPs and waste incineration products align with this.

• [00:24:09] Harshit Patel from Equirus asked about the order intake for the greater than 30 MW segment in the first 9 months of FY23. Nikhil Sawhney MD replied that TRITURBINE is optimistic about its segment gaining traction soon, especially in the 30 plus MW market which is expected to grow domestically and internationally. TRITURBINE is confident in its product range up to 100 plus MW and will stop distinguishing between below and above 30 MW next year.

• [00:28:26] Harshit Patel from Equirus enquired if subcontracting costs highlighted only for SADC region or across the globe in aftermarket business. Nikhil Sawhney MD answered it’s difficult to answer, but the company disclosed the information in the note to accounts for the SADC region as it’s material. TRITURBINE don’t want to disclose more information.

• [00:29:33] Harshit Patel from Equirus asked if the company has added more employees in the past year and if employee count will stabilize at its current level. Nikhil Sawhney MD clarified the company hired 90 people due to increased sales and plan to hire more this year. Productivity will improve without increasing employee expenditure as a percentage of sales. High attrition is expected to continue due to industry trends.

• [00:31:48] Amit Anwani from Prabhudas Lilladher asked if aftermarket, particularly SADC, significantly contributed to the INR40-50 crore booked this quarter. Nikhil Sawhney MD clarified that its refurbishment aftermarket segment is growing strongly, with services ranging from low to high value-added. TRITURBINE acquired employees in Southern Africa, giving it a critical mass to succeed in that market. Although SADC contributed well in 3Q, focus is on all customers and geographies for profitability.

• [00:33:47] Amit Anwani from Prabhudas Lilladher queried that within export, how much will be product and aftermarkets and any key geographies to highlight. Nikhil Sawhney MD replied that in 3Q23 TRITURBINE received 30 MW of orders from South America, Africa, North America, Southeast Asia, and Europe. Despite competition, TRITURBINE margins expanded due to market growth and lower commodity prices. TRITURBINE expect expenses related to internationalization but remain optimistic about margins and the future.

• [00:38:28] Chirag Muchhala from Centrum asked that over the next 2-3 years, based on the enquiry pipeline in capex trends across industries, if reasonably high growth rate of 15%, 20% is possible. Nikhil Sawhney MD answered that the company aims to beat its order booking numbers for FY23 and is providing visibility on enquiry book and order growth. TRITURBINE’s product execution profile is 8-9 months for smaller turbines and 12 months for larger ones, and services take 3-6 months. TRITURBINE has a lot of book-and-bill in FY23, which sustains growth. While FY24 is secured, TRITURBINE has good visibility to sustain growth in FY25-26.

• [00:49:26] Alisha Mahawla from Envision asked if domestic enquiries are showing a slowdown or decline, as mentioned in previous quarters’ comments. Nikhil Sawhney MD said the significant increase in inquiries before the consecutive 5% decline should be noted, but the decline itself may not be entirely material.

• [00:50:46] Alisha Mahawla from Envision asked which industry or segment is experiencing delays in decision-making, possibly due to price hikes, commodity inflation, or postponed demand. Nikhil Sawhney MD answered that the metal industry is a significant contributor to power generation, but the country needs to add more capacity for future demand. Despite cash flow matching based on commodity prices, the demand for metals will continue and must be fulfilled eventually.

• [00:54:48] Krishna Kansara enquired about the sustainability of order inflow and if it can be maintained. Nikhil Sawhney MD said the company aims to maintain order book growth and sustain revenue growth, despite the high turnover growth of 45%. TRITURBINE’s growth prospects are positive, with visibility into FY24 and ’25 based on its enquiry book. Additionally, new revenue streams will come from the release of its new products in supercritical and trans-critical carbon dioxide over the next few years.