Fundamental Analysis

Fundamental Analysis
Value Stock Pick- Triveni Turbines LTD

BSE: 533655, NSE: TRITURBINE, Sector: Engineering-Heavy

3/13/2014
SHIVANSH MISHRA

FUNDAMENTAL ANALYSIS

2
Shivansh Mishra
Associate- Business Analyst
MBA, National Certified Market Professional (NSE)
Email: mishrashivansh70@gmail.com
Mobile No: +91 9650247121
Sources: www.nse.com, annual report, corporate presentations, industry reports etc.
TRIVENI TURBINE:
Triveni Turbine Ltd (TTL), part of the Triveni Group is a leading industrial steam turbine
manufacturer upto 30 MW with over four decades of experience. TTL was formed in October 2010
after Triveni Engineering & Industries Ltd demerged its steam turbine business unit into an
independent entity. Post the demerger the stock got listed on October 28, 2011.
TTL main business is manufacturing and selling steam turbines based on customers specifications. It
also manufactures spare parts and provides after sales services for turbines manufactured by the
company as well as others. The company commands a market share of 60% in India up to 30 MW
range. TTL has done over 2,500 installations, in 18 diverse industries in 30 countries.
The manufacturing facility is located in Bangalore and has an annual capacity of 150 (nos) turbines.


3
Shivansh Mishra
Mobile No: +91 9650247121
The below Graphs shows the capacity requirement in MW for various industry segments


4
Shivansh Mishra
Mobile No: +91 9650247121

Financial for Last Three Years
Income Statement


5
Shivansh Mishra
Mobile No: +91 9650247121

In the calculations above following points are clear:
1) The business is high margin , a double digit PAT margins confirms the hypothesis
2) The asset deployed has been turned around efficiently to generate revenue with 5.56 times
3) Reduction in cash conversion cycle shows increase in the operating efficiency
4) The negative PAT in 2011 is because of high misc. expenses of demerger of the turbine
business
5) Regardless of Indian Economy slowing down in 2012, the company was able to sustain its
revenue which shows the competency of the management.
6) Reduction of debt was a good move and will help the company in the long run
7) No equity Dilution done to increase the returns
8) Increasing Reserves without dilution is a positive sign for the business.


6
Shivansh Mishra
Mobile No: +91 9650247121

Margins have been promising for past three years (Post Demerger)

Returns Made in Last three years ( Post Demerger)

-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
FY'11 FY'12 FY'13
Gross Margin
EBITDA Margin
PBT Margin
PAT Margin
-350%
-300%
-250%
-200%
-150%
-100%
-50%
0%
50%
100%
150%
200%
FY'11 FY'12 FY'13
ROCE
ROE
ROA

7
Shivansh Mishra
Mobile No: +91 9650247121

This Chart proves that the company has been outstanding prior demerger, as it has given 100%
plus ROCE, Consistent Profit Margins of 12% plus & a CAGR of 28% in Sales

8
Shivansh Mishra
Mobile No: +91 9650247121

Three Segments Targeted By Triveni Turbine:
The Renewable Energy market is the second largest segment of market demand, through the
course of a business cycle, for the products of Triveni Turbines. They are characterised by
three distinct sectors small-scale renewable-based Independent Power Producers, agro-
based co-generation and renewable waste-heat recovery Captive Power Plants. These sectors
have the advantage of an assured fuel supply coupled with financial incentives, which makes
this segment a steady contributor to demand. The renewable based Independent Power
Producers and agrobased co-generation sectors are the most reliable sources of demand for
steam turbines. While this demand may not be as large as the potential of the Industrial
Capital Expenditure segment, it does form a base demand. As this sector will always attract
investments - as long as the feedstock is available -it is usually non-cyclical.

Small Scale
Renewable
Indepenent
Power
Producers
Agro Based
Cogeneration
Renewable
Waste
Recovery
Captive
Power Plants

9
Shivansh Mishra
Mobile No: +91 9650247121
As per industry data, of the total installed renewable energy capacity of 28 GW in India as on
March 31, 2013, approximately twenty percent has been set up through bagasse co-
generation, biomass and waste-to-power.
The second segment which contributes to demand for Trivenis products, within the
Renewable Energy segment is the waste heat recovery Captive Power Plants. Demand from
this sector is counter cyclical to the business cycle and Industrial Capital Expenditure
segment. When business sentiment is low, companies tend to increase capital expenditure on
efficiency. This efficiency-spend manifests itself in streamlining of operations and the
reduction of operating costs primarily through captive power generation. Many industries
which deploy processes that are exothermic in nature and generate heat during their process.
These companies can use their surplus heat to drive the turbine and hence generate
electricity
The third segment which drives demand for steam turbines is the oversizing of captive
power plant capacities to be able to sell the surplus generation to the grid. According to
industry data, as on March 31, 2013, the captive generating capacity connected to grid in
India is about 35 GW. Across industries, there is significant variation in captive capacity
utilisation. Metals, Heavy engineering, Chemicals, Petroleum, Paper, and Cement industries
account for 70% of the total captive capacity and 85% of the generation.
Aftermarket Services: The Company provides 360 degree after-sales services. These
include erection and commissioning, supply of spare parts, refurbishment and operation &
maintenance. The 24x7 customer care support helps customers maintain a high uptime. The
dedicated customer care cell serves customers through an integrated network of service
centres, with a team of over 180 well trained employees. The aftermarket business showed
year on year growth of 19% and increased contribution of 19% to overall revenue. This
segment is well positioned for further growth, through continued focus on utility and
industrial segment turbines.


10
Shivansh Mishra
Mobile No: +91 9650247121
Investment Rationale:
The history of Triveni Turbine is impressive and post demerger it has been consistent.
One of the Important and prudent steps taken by mgmt is the JV with General Electrics (GE) in
the 30-100 MW turbines, this not only gives Triveni the technological edge but also the global foot
print via GE. Since the business is directly prone to the economy the sales have been slowed in past
year but that was taken care by the after sales segment which is giving Triveni 18% growth yoy.
Negative working capital, zero debt, surplus cash, superb margins and turnover ratio and most
important is the consistent 100% plus ROCE, are some of the drivers for its stock performance in
the future.
The stock is a buy below 58 levels and can do wonders in coming years with the boost in the
economy and the orders for the JV.

Some other Silent features for the company
As on March 2013, Company has filled 80 unique IPRs
The company won the prestigious National Intellectual Property Award 2013 in the category
of Top Organisation in Design
Currently Triveni is in more than 50 Countries and its under the mode of expansion
geographically.

Disclaimer: The stock suggested in the report has been picked with personal due diligence, the
author suggest investors to do their own research and check their risk appetite before taking any
recommendation.

Fundamental Analysis - Triveni Turbines

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