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What’s Driving Investor Interest in Triveni Turbines Ltd? Stock UP 40 % in last 2 Months

Shareholding Pattern (%) 

Promoter’s = 67.78 

Foreign = 16.97 

Domestic Institution = 11.55 

Public & Others = 3.70 

Promoter Pledge (Rs billion) = Nil

Triveni Turbine Limited (TTL) is a leading manufacturer of industrial steam turbines. It mainly manufactures steam turbines up to 30 MW. It has been a division of Triveni Engineering & Industries Limited since the 1970s and was demerged with effect from October 2010.

Over the years, the company has completed more than 4,000 installations in both the domestic and foregin markets. Its manufacturing facilities are located at Sompura and Peenya in Bengaluru. Triveni Turbine Ltd (TTL) is the leader in the domestic steam turbine market up to 30 MW, delivering robust, reliable and efficient end-to-end solutions.

TTL posted robust revenue growth of close to 41% YoY in Q1FY23, led by strong export sales of 59% YoY, while domestic sales grew 32% YoY, order inflows of Rs 3.6 billion (up 30.9% YoY) were driven by higher international product orders and a large aftermarket order in the Southern African Development Community (SADC) region.

EBITDA increased 36% to ₹561 crore in Q1FY23 from ₹413 crore in Q1FY22.

EBITDA margins fell close to 70bps to 21.7% in Q1 FY 23 vs. 22.4% in Q1 FY 22. The decline in EBITDA margin in Q1 FY 23 over the past year is largely attributable to higher costs on raw materials and post-tax profit growth of 38% YoY to ₹383 crore.

Strong demand from both the domestic and export markets is likely to aid medium-term order inflow visibility. TTL’s entry into the API segment and 30+MW turbines with growing export orders would help profitability going forward. Export demand volume grew by 22% year-on-year from Central and South America, Turkey, North America, Southeast Asia and Europe with higher demand in the IPP segment followed by manufacturing.

Reduced operational costs, self-sufficiency, decarbonisation and focus on earning carbon credits across segments such as waste-to-energy, biomass, steel, etc. are some of the key factors driving the demand for steam turbines. Domestic demand remains healthy from sectors such as distilleries, steel, cement, pharma, pulp, paper, food processing, etc., leading to revenue growth, which was largely driven by recovery in the end-user market and strong export growth ( year-on-year by 59%).

The aftermarket segment recorded order bookings of ₹ 1.0 billion during the quarter, an increase of 81% compared to the same period last year. This is the first time the segment has crossed the ₹1 billion mark in a quarter. Aftermarket turnover was ₹ 677 crore during the quarter, an increase of 33% over the previous year. Aftermarket contributed 26% of total revenue in Q1 FY 23 as against 28% in Q1 FY 22.

The company is adding a new plant at Sompura which will increase capacity from 150-180 machines to 200-250 machines/year and is expected to be completed by Q2FY23. No additional capacity will be needed to meet growing demand over the next few years.

Triveni has low API market share and aims to increase in future, API turbine which is mostly an import substitute is likely to gain traction in sectors like O&G, fertilizers etc.

Despite the challenges posed by the pandemic and war, the potential for growth is clearly significant. The Indian economy is expected to recover and continued investment is expected in end-user industries such as distillery, oil and gas, cement, steel, fertilizers, textiles and others.

Furthermore, the demand for high-efficiency steam turbines has increased on the back of the increasing importance of efficiency in power generation. With a large portfolio of efficient reaction type products from 3 MW to 100 MW, Triveni turbines are well positioned to meet this growing demand.

With a strong order book of Rs 10.7 billion, a robust demand pipeline, an incremental opportunity with foray into the 30-100MW market along with API turbines and a favorable product mix likely to help margins and drive growth in the medium term, the company is currently executing capital expansion and preparing its supply chain and sales network to drive future growth.

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