RESULTS REVIEW 3QFY17 11 FEB 2017

Triveni Turbine
BUY

INDUSTRY CAPITAL GOODS Margins surprise

CMP (as on 10 Feb 2017) Rs 125 Triveni Turbines (TRIV) 3QFY17 revenue (flat YoY) Highlights of the quarter
was below our estimates. However, better-than- The mgmt expects order inflows to improve
Target Price Rs 148
expected EBITDA margins (26.3%, +550bps YoY) led substantially in 4QFY17E/1QFY18E, which should
Nifty 8,794 to an in line PAT (Rs 351mn, +19% YoY). The superior enable it to end FY17E with a higher order book on
Sensex 28,334 EBITDA margin was led by the execution of high a YoY basis. In addition, few large orders in the
KEY STOCK DATA margin export orders and strong growth in after- international markets are expected to be awarded
Bloomberg /Reuters TRIV IN market sales (+27% YoY). Export (+163% YoY) in 1QFY18E, which would provide enough revenue
No. of Shares (mn) 330 continues to be the growth driver, while the growth visibility for FY18E.
MCap (Rs bn) / ($ mn) 41 / 616
domestic segment (-41% YoY) continues to decline. With an enquiry order book of ~7GW from ~130
Order book (Rs 6.3bn) declined 7% YoY. countries, the outlook for the international market
6m avg traded value (Rs mn) 22
We continue to remain constructive on TRIV, given continues to be promising. However, the domestic
STOCK PERFORMANCE (%)
potentially large opportunities and TRIVs market is expected to remain flat for the next 2
52 Week high / low Rs 136 / 88 quarters as order finalisation by clients continues
competitiveness (cost efficiency and GE backing) to
3M 6M 12M capture market share. Commissioning of 3 turbines to be delayed.
Absolute (%) (1.7) 4.7 28.7 in the 30 MW plus segment in international markets TRIVs initiatives to expand international service
Relative (%) (4.7) 2.7 9.4 would improve TRIVs references for future orders. centres have also started paying off as it is likely to
SHAREHOLDING PATTERN (%) New product offering (API 612 turbines, service close a large order in Kuwait in 4QFY17E.
Promoters 67.73 income) further enhances visibility on exports. Near-term outlook: While valuations are steep,
FIs & Local MFs 6.16 Reiterate BUY with a TP of Rs 148/sh (30x Dec-18E we expect the stock to outperform going ahead
EPS). given the strong fundamentals. BUY.
FIIs 20.69
Public & Others 5.42 Financial Summary
Source : BSE (Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%) FY15 FY16 FY17E FY18E FY19E
Net Sales 1,981 1,977 0 2,008 (1) 6,508 7,963 8,010 9,059 10,303
EBITDA 521 412 27 414 26 1,226 1,698 1,785 2,027 2,319
Pawan Parakh, CFA
pawan.parakh@hdfcsec.com PAT 351 296 19 320 10 952 1,076 1,307 1,474 1,677
+91-22-6171-7314 Diluted EPS (Rs) 1.1 0.9 19 1.0 10 2.9 3.3 4.0 4.5 5.1
P/E (x) 43.2 38.3 31.5 27.9 24.5
Ashutosh Mehta, ACA EV / EBITDA (x) 33.4 23.8 22.3 19.3 16.5
ashutosh.mehta@hdfcsec.com RoE (%) 47.2 41.3 39.0 34.5 31.1
+91-22-3078-8241 Source: Company, HDFC sec Inst Research
HDFC securities Institutional Research is also available on Bloomberg HSLB <GO> & Thomson Reuters
 TRIVENI TURBINE : RESULTS REVIEW 3QFY17

Quarterly Financials - Standalone

(Rs mn) 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%)
Net Sales 1,981 1,977 0 2,008 (1)
While domestic revenue
Material Expenses 1,017 1,215 1,148
declined 41% YoY, exports Employee Expenses 174 143 159
grew 163% YoY leading to flat Other Operating Expenses 269 207 287
revenues YoY EBITDA 521 412 27 414 26
Interest Cost 2 1 0
Depreciation 37 38 34
Other Income (incl E/o items) 45 70 100
PBT 528 443 19 481 10
Tax 177 147 160
Reported PAT 351 296 19 320 10
E/o inc/(loss) (net of tax) 0 0 0
APAT 351 296 19 320 10
Source: Company, HDFC sec Inst Research

Margin Analysis - Standalone

EBITDA margin improvement 3QFY17 3QFY16 YoY (%) 2QFY17 QoQ (%)
(548bps YoY to 26.3%) was led Material Expenses as % of Net Sales 51.3 61.5 -1015 57.2 -585
by execution of high margin Employee Expenses as % of Net Sales 8.8 7.2 155 7.9 89
export orders and strong Other operating expenses as % of Net Sales 13.6 10.4 312 14.3 -73
growth in after-market sales EBITDA Margin (%) 26.3 20.8 548 20.6 569
(+27% YoY) Net Profit Margin (%) 17.7 15.0 275 15.9 177
Tax Rate (%) 33.5 33.2 30 33.4 12
Source: Company, HDFC sec Inst Research

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 TRIVENI TURBINE : RESULTS REVIEW 3QFY17

Revenue Growth Trajectory - Standalone EBITDA And EBITDA Margin - Standalone

Revenue Growth YoY (RHS)
EBITDA Margin (RHS)
Margins would get a further 2,500
%
60.0 600
%
30.0
fillip as after-market sales
50.0 500 25.0
from exports also start 2,000
contributing 40.0 400 20.0
1,500
30.0 300 15.0
1,000
20.0 200 10.0
500 10.0 100 5.0

0 0.0 0 0.0

1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
Source : Company, HDFC sec Inst Research Source : Company, HDFC sec Inst Research

Exports Outpace Domestic Sales Order Book Mix

Revenue contribution from

exports was 53% in 3QFY17 for
Domestic
TRIV (up from 20% in 3QFY16) Domestic
47% 57%

Exports
43%
Exports
53%

Source : Company, HDFC sec Inst Research Source : Company, HDFC sec Inst Research

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 TRIVENI TURBINE : RESULTS REVIEW 3QFY17

Assumptions - Consolidated
Revenue (Rs mn) FY15 FY16 FY17E FY18E FY19E
We expect order inflows to Domestic order inflows 3,530 3,260 3,749 3,936 4,330
grow at 16% over FY17E-19E, YoY (%) -15% -8% 15% 5% 10%
led largely by a growth in Export order inflows 2,930 4,461 4,684 5,855 7,027
export orders YoY (%) 98% 52% 5% 25% 20%
Total Order inflows 6,460 7,721 8,433 9,792 11,357
YoY (%) 15% 20% 9% 16% 16%
Order book (Rs mn) 6,000 6,640 7,063 7,796 8,850
Revenue 6,508 7,963 8,010 9,059 10,303
EBITDA margins (%) 18.8% 21.3% 22.3% 22.4% 22.5%
Net margins (%) 13.9% 13.5% 16.3% 16.3% 16.3%
Source: Company, HDFC sec Inst Research

Key Changes In Estimates

Previous estimates Revised estimates % change
(Rs mn)
FY17E FY18E FY19E FY17E FY18E FY19E FY17E FY18E FY19E
Revenue 8,023 9,142 10,624 8,010 9,059 10,303 -0.2% -0.9% -3.0%
EBITDA 1,789 2,042 2,379 1,785 2,027 2,319 -0.2% -0.7% -2.5%
APAT 1,309 1,484 1,717 1,307 1,474 1,677 -0.2% -0.7% -2.3%
Source: Company, HDFC sec Inst Research

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 TRIVENI TURBINE : RESULTS REVIEW 3QFY17

Peer Valuation
MCap CMP TP EPS (Rs/sh) P/E (x) EV/EBITDA (x) ROE (%)
Company Rating
(Rs bn) (Rs) (Rs) FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E FY16 FY17E FY18E
Larsen & Toubro ^ 1,399 1502 BUY 1,625 64.8 69.2 69.8 18.0 16.9 16.7 17.2 15.7 13.9 13.1 12.8 11.9
Cummins India * 247 892 BUY 1005 27.3 30.6 34.4 32.6 29.2 25.9 29.6 26.1 22.8 22.8 23.3 23.6
Voltas 115 347 BUY 351 12.4 14.5 16.6 27.9 23.9 20.9 20.5 16.8 14.1 16.2 16.8 17.1
Engineers India * 106 157 BUY 178 5.9 6.2 8.0 26.7 25.2 19.6 22.0 19.5 13.7 14.4 14.5 18.0
Thermax 104 873 SELL 770 26.3 27.8 31.8 33.1 31.4 27.4 23.3 20.5 17.3 12.8 12.4 13.0
Suzlon 103 17 BUY 24 0.9 1.2 1.5 19.7 14.4 11.5 9.9 8.9 8.1 NA NA NA
Carborundum Universal 50 264 BUY 340 8.9 11.5 13.6 29.5 22.8 19.4 14.1 12.1 10.5 13.4 15.4 15.9
Crompton Greaves ^ 45 71 BUY 82 -1.2 1.6 1.6 NA 38.0 36.8 13.4 11.7 10.8 -1.7 2.2 2.3
Kalpataru Power * ^ 44 284 BUY 363 17.2 18.5 21.3 12.7 11.9 10.3 9.1 8.3 7.3 11.1 10.8 11.2
Techno Electric ^ 42 370 BUY 371 15.9 19.3 21.9 20.0 16.5 14.5 14.8 13.0 11.4 17.3 18.6 18.5
KEC International 42 164 BUY 179 10.2 11.1 12.7 16.1 14.8 12.9 8.6 7.9 7.1 16.1 15.2 15.3
Triveni Turbine 41 125 BUY 148 4.0 4.5 5.1 31.5 27.9 24.5 22.3 19.3 16.5 39.0 34.5 31.1
Inox Wind 40 182 BUY 298 21.4 24.9 25.8 8.5 7.3 7.0 5.6 4.7 4.4 22.8 22.0 19.8
Sanghvi Movers * 11 244 BUY 370 24.2 28.3 33.3 10.1 8.6 7.3 4.5 3.8 3.2 13.2 13.7 14.3
*Note - represent SA numbers ^ P/E adjusted for value of Subs /JV's / non-core businesses
Source : Company, HDFC sec Inst Research

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 TRIVENI TURBINE : RESULTS REVIEW 3QFY17

Income Statement - Consolidated Balance Sheet - Consolidated

(Rs mn) FY15 FY16 FY17E FY18E FY19E (Rs mn) FY15 FY16 FY17E FY18E FY19E
Net Revenues 6,508 7,963 8,010 9,059 10,303 SOURCES OF FUNDS
Growth (%) 26.3 22.4 0.6 13.1 13.7 Share Capital 330 330 330 330 330
Material Expenses 3,829 4,535 4,566 5,164 5,873 Reserves 1,956 2,596 3,440 4,451 5,665
Employee Expenses 622 705 705 788 886 Total Shareholders Funds 2,286 2,926 3,770 4,781 5,995
SG&A Expenses 832 1,025 954 1,080 1,225 Minority Interest 67 98 98 98 98
Total Expenses 5,282 6,265 6,225 7,032 7,983 Long Term Debt 129 4 - - -
EBITDA 1,226 1,698 1,785 2,027 2,319 Short Term Debt - - - - -
EBITDA Margin (%) 18.8 21.3 22.3 22.4 22.5 Total Debt 129 4 - - -
EBITDA Growth (%) 18.4 38.5 5.1 13.6 14.4 Net Deferred Taxes 77 97 97 97 97
Depreciation 158 161 151 175 205 Long Term Provisions &
45 47 49 55 62
EBIT 1,068 1,537 1,635 1,852 2,114 Others
Other Income (Including EO TOTAL SOURCES OF FUNDS 2,605 3,172 4,013 5,030 6,252
341 127 205 230 257
Items) APPLICATION OF FUNDS
Interest 18 14 15 20 20 Net Block 1,551 1,511 1,689 2,013 2,308
PBT 1,391 1,650 1,825 2,062 2,351 CWIP 61 329 500 500 500
Tax (Incl Deferred) 431 543 602 680 776 Investments - - - - -
RPAT 960 1,106 1,223 1,381 1,575 LT Loans & Advances 281 414 407 460 523
Minority Interest (27) (30) 84 93 102 Total Non-current Assets 1,892 2,253 2,596 2,973 3,331
EO (Loss) / Profit (Net Of Tax) (19) - - - - Inventories 1,349 1,880 1,756 1,986 2,258
APAT 952 1,076 1,307 1,474 1,677 Debtors 1,483 1,179 1,207 1,365 1,552
APAT Growth (%) 40.2 13.0 21.5 12.8 13.8 Other Current Assets 691 591 581 657 747
Adjusted EPS (Rs) 2.9 3.3 4.0 4.5 5.1 Cash & equivalents 337 705 1,336 1,965 2,817
EPS Growth (%) 40.2 13.0 21.5 12.8 13.8 Total Current Assets 3,860 4,355 4,880 5,973 7,374
Source: Company, HDFC sec Inst Research Creditors 2,740 3,271 3,292 3,723 4,234
Other Current Liabilities &
407 166 171 193 220
Provns
Total Current Liabilities 3,147 3,437 3,463 3,916 4,454
Net Current Assets 713 918 1,417 2,056 2,920
TOTAL APPLICATION OF
2,605 3,172 4,013 5,030 6,252
FUNDS
Source: Company, HDFC sec Inst Research

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 TRIVENI TURBINE : RESULTS REVIEW 3QFY17

Cash Flow - Consolidated Key Ratios - Consolidated

(Rs mn) FY15 FY16 FY17E FY18E FY19E FY15 FY16 FY17E FY18E FY19E
Reported PBT 1,391 1,650 1,825 2,062 2,351 PROFITABILITY %
Non-operating & EO items (341) (127) (205) (230) (257) GPM 41.2 43.1 43.0 43.0 43.0
Interest Expenses 18 14 15 20 20 EBITDA margin 18.8 21.3 22.3 22.4 22.5
APAT margin 14.6 13.5 16.3 16.3 16.3
Depreciation 158 161 151 175 205
RoE 47.2 41.3 39.0 34.5 31.1
Working capital change 45 51 141 (57) (68) Core RoCE (RoIC) 34.4 43.5 42.6 43.2 43.6
Tax Paid (431) (543) (602) (680) (776) RoCE 40.9 37.6 36.7 32.9 30.0
Other operating items (499) (170) 58 93 102 EFFICIENCY
OPERATING CASH FLOW (a) 341 1,036 1,382 1,383 1,577 Tax Rate (%) 31.0 32.9 33.0 33.0 33.0
Capex (98) (351) (500) (500) (500) Fixed Asset Turnover (x) 4.0 4.3 3.7 3.6 3.7
Free Cash Flow 243 685 882 883 1,077 Inventory (days) 75.7 86.2 80.0 80.0 80.0
Investments - - - - - Debtors (days) 83.2 54.0 55.0 55.0 55.0
Non-operating Income 341 127 205 230 257 Other Current Assets (days) 38.8 27.1 26.5 26.5 26.5
Payables (days) 153.7 149.9 150.0 150.0 150.0
INVESTING CASH FLOW (b) 243 (224) (295) (270) (243)
Other Current Liab & Provns
Debt Issuance/(Repaid) (59) (125) (4) - - 22.8 7.6 7.8 7.8 7.8
(days)
Interest (18) (14) (15) (20) (20) Cash Conversion Cycle (days) 21.1 9.8 3.7 3.7 3.7
FCFE 167 546 863 863 1,057 Debt/EBITDA (x) 0.1 0.0 - - -
Share Capital Issuance - - - - - Net D/E (x) (0.1) (0.2) (0.4) (0.4) (0.5)
Minority Interest 27 30 - - - Interest Coverage (x) 60.9 111.6 109.0 92.6 105.7
Dividend (290) (335) (437) (463) (463) PER SHARE DATA (Rs)
FINANCING CASH FLOW (c) (339) (443) (456) (483) (483) EPS 2.9 3.3 4.0 4.5 5.1
NET CASH FLOW (a+b+c) 245 368 631 629 851 CEPS 3.4 3.8 4.4 5.0 5.7
Dividend 0.9 1.1 1.2 1.2 1.2
Closing Cash & Equivalents 337 705 1,337 1,966 2,817
Book Value 6.9 8.9 11.4 14.5 18.2
Source: Company, HDFC sec Inst Research
VALUATION
P/E (x) 43.2 38.3 31.5 27.9 24.5
P/BV (x) 18.0 14.1 10.9 8.6 6.9
EV/EBITDA (x) 33.4 23.8 22.3 19.3 16.5
EV/Revenues (x) 6.3 5.1 5.0 4.3 3.7
OCF/EV (%) 0.8 2.6 3.5 3.5 4.1
FCF/EV (%) 0.6 1.7 2.2 2.3 2.8
FCFE/Mkt Cap (%) 0.4 1.3 2.1 2.1 2.6
Dividend Yield (%) 0.7 0.9 1.0 1.0 1.0
Source: Company, HDFC sec Inst Research

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 TRIVENI TURBINE : RESULTS REVIEW 3QFY17

RECOMMENDATION HISTORY
Triveni Turbines TP
Date CMP Reco Target
150 22-Jun-16 112 BUY 128
140 6-Aug-16 123 BUY 128
130 16-Nov-16 122 BUY 146
120 11-Feb-17 125 BUY 148
110
100
90 Rating Definitions
80 BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period
Feb-16

Sep-16

Feb-17
Nov-16
Jun-16
May-16

Dec-16
Mar-16

Oct-16
Aug-16
Apr-16

Jan-17
Jul-16

NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period
SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

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 TRIVENI TURBINE : RESULTS REVIEW 3QFY17

Disclosure:
We, Pawan Parakh, CA, CFA, & Ashutosh Mehta, ACA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect
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Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest.
Any holding in stock No

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