Triveni Engineering - Q4FY20 First Cut - ICICI Securities

CMP: Rs. 52; Market Cap: Rs. 1215 crore

Triveni Engineering reported strong Q4FY20 results with revenue & earnings growth of 74.9% & 72.6% respectively.

Q4FY20 Earnings Summary

- The company witnessed a robust 74.9% sales growth led by 105% growth in sugar segment & 97.4% growth in distillery segment. The company exported 1.3 lakh tonnes of sugar during the quarter. In total it sold 3.79 lakh tonnes of sugar as against 1.89 lakh tonnes in corresponding quarter. Further, the growth in distillery segment was aided by new 160 KLD capacity, which was commissioned in May 2019. However, sales from co-generation was down by 10.3% due to considerable dip in power tariff earlier in the year. Gear business sales declined by 17.3 % impacted by loss of sales during lockdown. Water business seen a sales growth of 8.2%.

- Operating profit increased by 59.2% to Rs. 186.4 crore led by higher sugar & distillery sales. Operating margins were down by 123 bps due to reduction in power tariff earlier this year. Moreover, the company is yet to book the export subsidy of Rs. 57.7 crore. This has also impacted the operating margins adversely. The subsidy will be booked in next quarters.

- Net profit increased by 72.6% to Rs. 137.6 crore led by higher operating profit & lower tax provisioning. The company generated Rs. 510 crore of cash flow from operations & working capital debt reduced by Rs. 290 crore in FY20.

The impact of lockdown for the sugar industry was minimal with probable 1.0 million tonnes of lower sugar consumption due to demand destruction of ice-creams & carbonated drinks, which led to the dip in sugar prices to Rs. 31 / kg during April-May 2020. However, sugar prices are back to Rs. 33 / kg (pre covid19 levels). We believe sugar industry has been going through a fundamental change with MSP in place, sugar exports incentives & diversion of sugarcane towards B heavy ethanol. We believe Triveni engineering has been aggressively exporting sugar to reduce inventory. Moreover, it has been diverting sugarcane towards B heavy molasses, which would result in healthy operating cash flows generation in future as well. We remain positive on the stock.

We would be coming out with a detailed update soon.

Shares of TRIVENI ENGINEERING & INDUSTRIES LTD. was last trading in BSE at Rs.51.35 as compared to the previous close of Rs. 48.95. The total number of shares traded during the day was 137590 in over 534 trades.

The stock hit an intraday high of Rs. 51.35 and intraday low of 49.35. The net turnover during the day was Rs. 7037236.

Source : Equity Bulls

Keywords