Strong 1QFY20 numbers, Order backlog declines Management has maintained guidance for double digit revenue growth and expansion in margin in FY20. We have maintained our numbers and expect TRIV to deliver revenue/PAT CAGR of 12/19% over next two years (FY19-21E). The stock is currently trading at 27/23x FY20/FY21E. We maintain Accumulate with TP of Rs124 (28x FY21E).
Robust growth; healthy margins Triveni Turbine (TTL) has reported 1QFY20 consolidated revenue of Rs2.1bn, up 24% YoY and above our/consensus estimate of Rs1.8bn. Topline growth was driven by domestic sales, which grew by 83% YoY to Rs1.2bn, led by preponement of turbine deliveries. Export sales declined by 10% YoY to Rs971mn on a high base. Turbine revenues were up 33% YoY at Rs1.7bn, while After-market Services sales were flat YoY at Rs414mn. Gross margin contracted by 420bps YoY to 43.4% (44.2% in FY19) because of unfavourable revenue mix (high-margin After-market Services accounted for 19% of sales versus 24% YoY). EBITDA increased by 44% YoY to Rs437mn aided by lower other expenses (down 13% YoY at Rs245mn). Driven by value engineering and cost-reduction exercise, EBITDA margin jumped by 280bps YoY to 20.5%, above our/consensus estimates of 17.9%/17.7%. PBT grew by 54% YoY to Rs444mn while PAT jumped by 62% YoY to Rs307mn, partly aided by lower tax rate (30.9% versus 34.1%). Order inflow in 1QFY20 stood at Rs2.1bn, down 10% YoY, but in line with past two years’ averagequarterly run-rate of Rs2bn. Order backlog was flat QoQ and down 7% YoY at Rs7.2bn, with the domestic:export mix at 52:48. We maintain Buy rating on TTL with an unchanged target price of Rs135 based on 28x FY21E earnings.
Management has guided for double digit revenue growth and expansion in margin in FY20 (1QFY120 could be weaker due to elections). We expect TRIV to deliver revenue/PAT CAGR of 12/19% over next two years (FY19-21E). The stock is currently trading at 29.4/24.9x FY20/FY21E. We downgrade stock from Buy to Accumulate with revised TP of Rs124 (28x FY21E) due to a) weak pricing in domestic market due to intense competition b) Slower pick up in margins due to new product launches in new geographies c) weak outlook for GE Triveni JV.
However, it was broadly similar to 3QFY19 margin of 17%. PAT fell 20% YoY to Rs283mn, below our/consensus estimate of Rs363mn/Rs347mn, respectively. 4QFY19 margins were also impacted by adverse revenue mix owing to lower contribution from high-margin exports (37% of total sales versus 46% YoY) and after-market services (19% of total sales versus 22% YoY). Order inflow in 4QFY19 stood at Rs2.1bn, similar to the past three years’ averagequarterly run-rate of Rs2bn. However, it was down 19% YoY on a high base of 4QFY18 (which had highest quarterly inflow of Rs2.5bn). Order backlog grew 2% YoY to Rs7.2bn, with the domestic:export mix at 50:50. We have cut our earnings estimates by 7%/8% for FY20/FY21, respectively, and retained Buy rating on TTL with a revised target price of Rs135 (from Rs147 earlier) based on 28x FY21E earnings.