Buy Triveni Engineering; target of Rs 95: ICICI Direct

ICICI Direct's research report on Triveni Engineering

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.

Outlook

We value the stock at 1.4x FY21 book value with a revised target price of Rs 95/share and BUY recommendation