Company Aims 35% Revenue Growth Led By Strong Order Book, Buy Stock For 20% Gains: Sharekhan

Sharekhan in its report has given Triveni Turbine Limited (TTL) a "Buy" call with a target price of Rs 280 apiece. The brokerage has recently had an interaction with Triveni Turbine Limited (TTL), which reaffirms their bullish stance on the company, given its foray into high-margin API turbines, scaling up of 30-100 MW segment, and renewable energy orders driving its core business.

TTL is a small cap engineering sector company having a market capitalisation of Rs 7,594.45 crore. The Company has production facilities in Bengaluru, Karnataka, and its primary line of business is the manufacture and supply of power-generating tools and solutions.

According to the given estimated target price by Sharekhan, the stock has huge potential to surge around 20% in 12 months from its Current market Price.

Stock Outlook & Returns on Investments

The Current Market Price of TTL is stood at Rs 234.90 on NSE. The TTL share price was up by 1.18% from its previous closing price of Rs 231.05. The company's shares hit the 52-week low at Rs 137.95, and the 52-week high at Rs 248.80, respectively.

The shares in the last 1 Month moved up by 14.61%. Whereas, in the last 3 Months, it gave 50.24% positive returns. It gave a positive return of 47.32% in a year and 126.96% mulibagger returns in the past 3 years, respectively. Over the past 5 years, it gave 81.11% positive returns on investment.

Rotating in the right direction

Triveni Turbine Limited (TTL) is well poised to expand its addressable market base through foray into energy-efficient API turbines for the oil and gas industry, pursuing 30-100 MW opportunities and leveraging its expertise in the growing renewable energy market. Management is confident of achieving strong order inflows in FY2023 and expects ~35% revenue growth in the next couple of years. The company is currently undertaking capacity expansion and gearing up supply chain to prepare for high growth over the next two years. TTL continues to be the leader in the 0-30 MW steam turbine market and garners industry-leading margins.

API, replacement market could be key growth catalysts

The company is bullish on the prospects of American Petroleum Institute (API) compliant steam turbines. This business segment has started gaining traction since FY2022, when the company supplied 20-22 API turbines. The turbines are up to 3 MW and the addressable market for these turbines is 1,000 turbines per annum and there are large players such as Siemens and Elliott Ebara operating in this space. The company makes healthy margins on these products and expects their share to increase in the total revenue going forward. The replacement market, which consists of spares, service, and refurbishment, currently contributes 20-22% to total sales. The company expects that with increased installed base and entry into new geographies, contribution of the replacement market in total revenue/order book should grow by 1% every year. Margins in the spares segment are the highest, followed by refurbishment and is the lowest in the services segment. In 30-100 MW, the current share is miniscule, but it could be a key growth driver in the medium term, as it is seeing long-term opportunities in process industries, co-generation, IPP, and waste management in domestic and international markets.

Strong order book and promising enquiry pipeline

Total consolidated outstanding order book stands at ~Rs. 1,070 crore (including Rs. 100 crore service contract in SADC region) and provides strong revenue visibility. Domestic outstanding order book stood at Rs. 630 crore, while export outstanding order book is Rs. 440 crore. During Q1FY2023, TTL won a significant order of Rs. 100 crore for servicing large utility steam turbines in the SADC region. While margins for this particular order are of lower magnitude, being a maintenance contract, this opens up the opportunity for TTL to garner more aftermarket business with customers such as spares and refurbishment and generate references for similar future opportunities in the aftermarket space for its utility turbines globally. Further, the enquiry pipeline is quite robust in distillery, process co-generation orders in steel, cement, and pharmaceuticals. Moreover, enquiry generation in the international side grew by 22% in the last quarter in export markets such as Southeast Asia, North America, and South America.

Triveni Engineering stake sale positive for TTL

Recently, Triveni Engineering and Industries Ltd. (TEI) sold 21.85% stake in TTL for ~Rs. 1,600 crore. TEI sold 11.85% stake through block deal on the stock exchanges and the remaining ~10% was bought by the other promoter - Ms. Rati Sawhney of TTL. With the exit of TEI, total promoters stake in TTL would stand at 55.9% vs. 67.8% earlier. The transaction does not impact the fundamentals of the company. Moreover, the decline in promoter stake would increase the free float and liquidity of shares. On the positive side, anticipation regarding the stake sale, which had been an overhang on the stock, has also been removed.

Revision in estimates

"We have introduced FY2025E estimates and rolled forward our price target (PT) to September 2024E EPS," the brokerage has said.

Brokerage Retain Buy with a revised Price Target of Rs. 280

TTL is well poised for a high-growth trajectory, led by strong order inflows and promising inquiry pipeline in both 0-30 MW and 30-100 MW segments in domestic and international markets. The company's entry into the high-margin API segment, higher share of export orders, and aftermarket segment orders would aid in margin improvement. The company is currently undertaking capital expansion and gearing up its supply chain and sales network to drive future growth. "The stock is trading at ~28x its September FY2024E EPS, which we believe offers room for an upside, considering strong Revenue/PAT CAGR of ~29%/34% over FY2022-FY2025E. Further, nil debt, healthy cash balance, and strong return ratios give us comfort. Hence, we retain our Buy rating on TTL with a revised price target (PT) of Rs. 280," sharekhan has said.

According to the Sharekhan, the key risks would be, "Slowdown in domestic macroeconomic environment or weakness in international markets can affect business outlook and earnings growth."

Disclaimer

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.