- 03 Feb 2022
- ICICIdirect Research
Increasing sugar prices, diversion towards ethanol driving Triveni profitability
TRIVENI - 462 Change: -10.10 (-2.14 %)News: Triveni Engineering reported strong set of results with 26.4% growth in operating profit. Consolidated revenue (net of excise) remain flat mainly on account of lower sugar sales (7% de-growth) as company received relatively less domestic quota during the quarter. Sugar volumes declined by 13% to 2.22 lakh tonnes however, sugar realisation was up by 11% to Rs.36.4/kg. Distillery sales grew by 153.8% to Rs.275.6 crore on account of 18% increase in ethanol volumes & 16% jump in ethanol realisation mainly on account of increasing off-take from OMCs & higher proportion of B-heavy ethanol. The company produced 86% of ethanol from B-heavy molasses. The company also clocked 5.38 lakh cases of IMIL during the quarter. Operating profit witnessed a growth of 26.4% to Rs.202.8 crore during the quarter led by firm sugar prices, higher ethanol volumes & higher proportion of B-Heavy ethanol. Net profit witnessed a growth of 37.5% to Rs.130.1 crore aided by strong growth in operating profit.
Views: Sugar prices have seen an uptick in last six months mainly on account of reduction in sugar inventories & increasing diversion of sugarcane towards ethanol. Sugar inventories in the country has come down from 14.5 million tonnes in September 2019 to 8.2 million tonnes in September 2021. Considering ~4.5 million tonnes of exports have been contracted in the current season, inventories would further come down to 6.5-7.0 million tonnes by September 2022. Triveni has been aggressively diverting sugarcane towards ethanol production in the current season. Moreover, with the commissioning of new distillery in March 2022 & brownfield capex in existing distillery by June 2022, the company would be able to scale up of its annual distillery capacity to 22 crore litres. We believe Triveni engineering would be beneficiary of higher sugar prices & increasing ethanol volumes going forward. We remain positive on sugar sector & Triveni engineering.
Impact: Positive