Fundamental Report Triveni Engineering & Industries Ltd

Outlook:

Triveni Engineering & Industries Ltd. Is one of the largest integrated Sugar manufacturers in India and also emerged as the market leader in high-speed industrial gears and gearboxes. The sugar industry witnessed significant reduction in sugar inventory in the last one year, which along with the increasing sugarcane diversion towards ethanol is leading to increase in sugar prices. Sugar companies like Triveni has been largely benefiting from relatively better sugarcane availability in 2020-21 sugar season, ramping up of ethanol capacities & higher domestic sugar prices. On performance front we expect company to report EPS of Rs.17.01 for FY23E, at CMP of Rs.218 PE works out to be 12.81x. Hence, investors can buy the stock at CMP of Rs.218 for target price of Rs.275. Time frame should be 9-12months.

Business Overview

Sugar: Triveni Engineering is the among the largest integrated sugar manufacturers in India and their association with Indian farmers is as old as the industry itself. It also Produce power from coproduct Bagasse – a residue of sugarcane crushing. Power generated by the company is used to meet captive needs, and surplus sold to Uttar Pradesh Power Corporation Limited.

Alcohol: Producers of ENA (which is used to produce Potable Alcohol) & Fuel-Grade Ethanol. It Has 2 state-of-the-art distilleries at Muzaffarnagar (MZN) & Sabitgarh (SBT) with 320 KLPD current capacity. The Company aims to double its Production capacity to 660 KLPD by Q3FY23. Currently the company is setting up two new distilleries of (i) 40 KLPD (grain based) at Muzaffarnagar, Uttar Pradesh ; and (ii) 160 KLPD (molasses/cane juice & syrup/grain based) at sugar unit situated at Milak Narayanpur, U.P raising total distillation capacity to 520 KLPD  which would get operational by Q4FY22.

Power Transmission – Triveni is the India’s largest manufacturer of industrial high-speed gears and gearboxes. Company’s Defence Business, a strategic business unit, is an OEM for many important defence products and solutions to Indian Navy & Indian Coast Guard. Triveni is the approved supplier of Propulsion Gearboxes, Gas Turbine Generators, Steam Turbines, Turbo auxiliaries and special application turbo & motor-driven pumps for the Indian Navy and Coast Guard.Water & Wastewater Treatment Solutions – Leading solutions provider for efficient water management for industrial/municipal/urban applications. 10,000 Million Litres Per Day (MLD) water treated

Source: Annual Report

Indian Sugar Industry and Outlook for Season 2021-2022:

Sugar production for the season 2020-21 was around 311.81 lakh tones with  domestic sales of around 265.55 lakh tonnes and exports of around 70.72 lakh tonnes during the season. Approximately 20 lakh tonnes of sugar were diverted for ethanol production in 2020-21.

In July 2021, Indian Sugar Mills Association (ISMA) had released its preliminary estimates of net sugar production at 310 lakh tonnes for 2021-22 SS (Sugar Season). This was estimated after considering a diversion of 34 lakh tonnes of sugar for production of Ethanol using B heavy molasses / juice / syrup.

The Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi, raised the price of ethanol extracted from sugarcane juice to Rs. 63.45 per litre from the current Rs. 62.65 per litre for the supply year beginning December 2021.

Domestic sugar prices rose to around Rs 34,000-36,000 per tonne in August-September 2021 after three years following sharp increase in global prices as well as onset of the festive season. Sugar prices expected to remain firm above Rs. 36,000 per tonne for the rest of FY22.

The international raw sugar prices firmed up to USD 420-440 per tonne in August-September 2021 compared to USD 270-280 per tonne in August-September 2020 in the anticipation of decline in Brazilian sugar production and thus, balanced global supply position.

In light of surged global sugar prices, the export prospects look promising for the upcoming sugar season even if export policy isn’t announced. The government has set a target of 20% ethanol blending by 2025. Along with the ENA and rectified sprit, total distillery demand is likely to be 1350 crore litre by 2025-26. The government is also encouraging usage of flex fuel vehicles (can run on both petrol & ethanol).

On the back of favourable pricing environments domestically and globally as well as increased share of ethanol in revenue mix, the revenues of a sample of sugar companies are expected to grow by 5-7 per cent in FY22 on a year-on-year basis.

(Source: Economic Times. NDTV)

 Quarterly Performance:

 

 

Particulars  (in Rs. Cr.)	Q2FY22		Q1FY22	Q2FY21	QoQ	YoY	H1FY22
Revenue from Operations		1068.46	1036.76	1168.39	3.1%	-9%	2105.22
Other Income		8.64	3.63	7.91	138.0%	9%	12.27
Total Income		1115.06	1046.45	1176.3	6.6%	-5%	2161.51
Raw Material Consumed		71.68	568.2	61.78	-87.4%	16%	639.88
Stock Adjustment		714.42	145.57	872.07	390.8%	-18%	859.99
Purchase of Finished Goods		3.18	5.92	3.12	-46.3%	2%	9.1
Employee Expenses		65.76	67.75	60.58	-2.9%	9%	133.51
Other Expenses		106.15	99.73	93.91	6.4%	13%	205.88
EBITDA		107.27	149.59	76.93	-28.3%	39%	256.86
Finance Cost		12.13	15.64	14.09	-22.4%	-14%	27.77
Depreciation		20.28	19.75	19.67	2.7%	3%	40.03
PBT		83.5	117.83	51.08	-29.1%	63%	201.33
Profit After Tax		92.47	92.3	31.18	0.2%	197%	184.77
EBITDA Margin (%)		10.0%	14.4%	6.6%	-439	784	12.2%
PATM (%)		8.3%	8.8%	2.7%	-53	617	8.5%

Segment Finance

Particulars (in Rs. Cr.)	Revenue		YoY	As % of Revenue		PBIT Margin
Segment	H1FY22	H1FY21	%	H1FY22	H1FY21	H1FY22	H1FY21
Sugar	1695.18	2067.27	-18%	69.5%	81.0%	7.3%	7.3%
Others	56.51	31.54	79%	2.3%	1.2%	2.2%	-0.2%
Distillery	512	278.6	84%	21.0%	10.9%	16.2%	16.1%
Water	91.42	119.43	-23%	3.8%	4.7%	11.0%	7.7%
Power Trans.	82.63	55.83	48%	3.4%	2.2%	35.2%	27.6%
Total	2437.74	2552.67	-5%	100.0%	100.0%	–	–

Cash Flow Statement

Particulars (in Rs. Cr.)	FY21	FY20	FY19
Cash and Cash Equivalents at Beginning of the year	32.04	14.62	3.67
Net Cash from Operating Activities	790.79	510.35	-168.7
Net Cash Used in Investing Activities	-107.86	-107.24	-214.74
Net Cash Used in Financing Activities	-703.69	-385.69	394.39
Net Inc/(Dec) in Cash and Cash Equivalent	-20.76	17.42	10.95
Cash and Cash Equivalents at End of the year	11.28	32.04	14.62

Balance Sheet

Particulars (in Rs. Cr.)	H1FY22	FY21	FY20
EQUITY & LIABILITIES
Shareholders Fund	1702.72	1555.67	1338.66
Share Capital	24.18	24.18	24.79
Reserves & Surplus	1678.54	1531.49	1313.87
Total Non Current Liabilities	513.69	515.19	600.92
– Long Term Borrowings	300.74	308.91	443.6
– Deferred Tax Liabilities(Net)	143.24	134.09	78.24
– Other Long Term Liabilities	16.26	20.44	31.15
– Long Term Provisions	53.45	51.75	47.93
Total Current Liabilities	666.43	1549.09	2106.43
– Short Term Borrowings	272.35	561.58	943.44
– Trade Payables	103.11	624.3	756.42
– Other Current Liabilities	253.47	325.93	374.74
– Short Term Provisions	37.5	37.28	31.83
TOTAL EQUITY & LIABILITIES	2882.84	3619.95	4046.01
ASSETS
Total Non Current Assets	1529.01	1407.31	1395.72
– Fixed Assets(incl. Capital Work in Progress)	1138.34	1094.55	1112.69
-Tangible Assets	1054.44	1071.08	1085.6
-Intangible Assets	2.03	1.92	0.93
-Capital Work in Progress	82.55	22.23	26.16
– Goodwill on Consolidation	0.68	0.68	0
– Non Current Investments	186.07	145.67	141.66
– Deferred Tax Asset(Net)	0.29	0.27	0.18
– Long Term Loans & Advances	160.8	133.81	90.26
– Other Non Current Assets	42.83	32.33	50.93
Total Current Assets	1353.83	2212.64	2650.29
– Inventories	862.5	1733.75	1912.13
– Trade Receivables	174.4	208.39	267.96
– Cash & Cash Equivalents	102.94	12.6	32.88
– Short Term Loans & Advances	0.41	18.44	3.38
– Other Current Assets	213.58	239.46	433.94
TOTAL ASSETS	2882.84	3619.95	4046.01
KEY RATIOS
Debt Equity Ratio	0.34	0.56	1.04
Current Ratio	2.03	1.43	1.26
Debtors Days	14.51	16.27	22.05
Creditors  Days	11.17	61.47	78.71
RONW %	21.4	18.94	25.03
ROCE %	25.06	20.9	19.04

Financial Extracts:

• Sugar business of the company in H1FY22 was impacted due to lower domestic sales quota and Exports.

• EBITDA margin was improved YoY in Q2FY22 to 10% on better sugar realizations (34212/MT – Domestic Realization price in H1 FY 22)

• Sugar inventory as on Sep 30, 2021 was 23.93 lakh quintals, which is valued at around Rs. 29.2/kg. Inventory at lower prices should help the company to improve realizations.

• Lower tax and higher Profit from the associates helped the company in 195% YoY increase in Net Profit against the EBITDA growth of 39% YoY.

• Distillery segment of the company is gaining traction with revenue contribution increased from 10.9% in H1FY21 to 21% in H1FY22.

• Reported higher profitability in Power Transmission business in Q2FY22 due to the highest ever quarterly revenue of Rs 54.36 Crore in Q2FY22. Closing order booking for the segment stood at Rs 160 Crore in Q2FY22.

• Turnover in the Water business was lower in H1FY22 as compared to corresponding period of last year, due to slow progress in certain projects and delays in lifting of equipment

• In Water Segment, Company has participated in large number of tenders which are in various stages of finalization and is expected to close some of these in the coming quarters.

• Return on Capital Employed improved from 20.9% in FY21 to 25.06% in H1 FY22

• Debt to Equity Ratio improved from 0.56 in FY21 to 0.34 in H1FY22.

 

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