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Triveni Engineering - Q1FY21 Result Update - ICICI Securities

Posted On: 2020-08-12 02:56:07

Triveni Engineering (TEL) posted robust revenue growth of 32.2% driven by 43.4% growth in sugar business & 50.2% growth in distillery business. The strong sugar sales growth was aided by 17.6% volume growth. The company received higher domestic sales quota of 2.09 lakh tonnes (lt) (vs. 1.59 lt in June 2019) in Q1. Despite aggressive exports in Q4, TEL further exported 78000 tonnes sugar in the current quarter. It was allocated 94210 tonnes of sugar in the process of re-allocating quantities to those millers who were interested in exporting additional sugar. Sugar realisation was down 2% with fall in sugar prices in April/May impacted by muted demand due to lockdown. The healthy growth in distillery segment was led by 23.9% growth in ethanol volumes with ramping up of new capacity utilisation. Ethanol realisation was also up 14.5% led by higher proportion of B heavy ethanol. However, within engineering business, gears sales were down 44% & water business was down 23% mainly due to halt in business activity during lockdown & lack of manpower availability. Operating profit increased 71% with higher sales. Net profit increased 145.9% to Rs. 83.8 crore driven by higher operating profit and 54% dip in interest cost.

Valuation & Outlook

With the 2.57 lt of sugar exports in sugar season 2019-20, the company has been able to reduce sugar inventory by ~1 lt in the last year. This has led to strong cash flow generation & Rs. 600 crore of debt (including working capital) reduction. We believe aggressive export, sugar sacrifice towards B heavy ethanol would further reduce sugar inventories by March 2021. We expect operating cash flow generation of ~Rs. 900 crore in next two years. We value the stock at 1.4x FY21 book value with a revised target price of Rs. 95/share and BUY recommendation.

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Shares of TRIVENI ENGINEERING & INDUSTRIES LTD. was last trading in BSE at Rs.77.75 as compared to the previous close of Rs. 71. The total number of shares traded during the day was 436109 in over 3489 trades.

The stock hit an intraday high of Rs. 82 and intraday low of 77. The net turnover during the day was Rs. 34287407.

Source: Equity Bulls

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