Triveni Engineering rallies 2% post robust Q4 results

Shares of Triveni Engineering and Industries Ltd. rallied 2 percent in early trade today post robust Q4 results. At 10:17 am the Triveni Engineering stock was trading 1.82 percent higher at Rs 279.50 on NSE.

The company logged a net profit of Rs 109.17 crore in the year-ago period, it said in a regulatory filing post-market hours on May 25, 2023. Revenue from operations rose 52.51 percent to Rs 1,818.29 crore from Rs 1,192.12 crore in the year-ago period. The board has recommended a dividend of Rs 3.25 per fully paid-up equity share of Re 1 each for the financial year ended 2022-23, subject to the approval of the shareholders, the company said.

Brokerage Views

ICICI Direct rates Triveni Engineering a buy with a price target of Rs 370. The positive recommendation comes on the back of Triveni Engineering’s strong financial performance in the fourth quarter of FY23. The company reported robust results, primarily driven by higher sugarcane crushing, an increase in ethanol production capacity, and a greater focus on producing B-heavy ethanol. These factors have contributed to Triveni’s improved profitability and growth prospects.

One of the key drivers of Triveni Engineering’s success is its ongoing expansion of distillery capacity, according to ICICI Direct. The company plans to increase its capacity to approximately 32 crore liters per annum by January 2024, up from the current 22 crore liters per annum. This strategic move will enable Triveni to divert more sugarcane towards ethanol production in the future, taking advantage of the growing demand for this renewable fuel source.

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Although Triveni has experienced lower sugar recovery in the current 2022-23 season, the company’s sugarcane crushing has increased by approximately 11 percent, the ICICI Direct report said. This rise in production volume helps partially offset the higher cost of production, contributing to improved operational efficiency. Furthermore, the upward trend in domestic sugar prices is expected to enhance Triveni Engineering’s profitability going forward.

ICICI Direct maintains a positive outlook on Triveni Engineering from a long-term growth perspective. To arrive at the target price of Rs 370 per share, the brokerage has employed the sum-of-the-parts (SOTP) valuation method. Under this approach, the engineering business of Triveni is valued at 14 times the estimated earnings before interest, tax, depreciation, and amortization (EV/EBITDA) for FY25. Additionally, the sugar business is valued at 12 times the estimated price-to-earnings (PE) ratio for FY25.

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