Triveni Engineering Q1 Results Review- Outlook For H2 Bright; Maintain Buy: Systematix

Systematix Report

Triveni Engineering and Industries Ltd. consolidated revenue grew 7% YoY to Rs 15.3 billion and was 6% below our estimate of Rs 16.3 billion. Sugar segment revenue increased 12% YoY fueled by higher sale volumes and realisations. The gears segment grew by a marginal 1% YoY. Distillery/Water segment posted weak performance with revenue dropping 2%/21% YoY respectively.

Ebitda dropped 31% YoY to Rs 862 and was 43% below our estimate of Rs 1.5 billion. Sugar/Distillery/Gears segment Ebit dropped 26%/62%/1% YoY respectively, while Water segment Ebit jumped ~2 times YoY led by cost savings. Gross margin contracted 576 basis points YoY to 34.9% (our estimate 42%) and Ebitda margin too contracted 310 bps YoY to 5.6% (our estimate 9.4%). Profit Before Tax dropped 54% YoY to Rs 417 million.

Consequently, profit after tax dropped 54% YoY to Rs 310 million and was 64% below our estimate of Rs 862 million. Management is strategically focused on restoring the sugar business back to normalcy by taking persistent efforts in eradicating infected crop, substituting low-yielding variety with more robust varieties, enhancing yields and has also undertaken curative control measures to combat the wide-spread Red-Rot disease.

Looking ahead, Triveni Engineering plans to concentrate on premium products like refined sugar and pharmaceutical-grade sugar (which now contributes ~70% of overall production) to further enhance its profitability.

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