TRIVENI ENGINEERING POSTS DISMAL OPERATIONAL NUMBERS IN Q2FY23

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 Triveni Engineering posted dismal operational numbers with 57.7% decline in operating profit. Consolidated sales witnessed a growth of 26.9% of Rs 1345.9 crore led by 45.2% growth in distillery sales & 26.3% growth in sugar sales. Gear business sales grew by 12.4% & water business sales grew by 43.1% during the quarter. Sugar sales has been driven by higher sugar volumes & uptick in prices. Domestic sales quota was higher by 20.5% to 2.59 lakh tonne whereas sugar realisation was higher by 1.6% to Rs 35.4 /kg. The strong 45.2% growth in distillery sales was led by higher volume as well as increase in realisation. Higher distillery volumes was mainly led by addition of capacities in June-2022 & scaling up of country liquor business. Moreover, higher proportion of B-heavy ethanol sales resulted in inching up of distillery realisation. Cost of production in 2021-22 sugar season was higher by Rs 3/kg due to increase in sugarcane prices & lower recovery rate in 2021-22 season. However, given sugar realisation was only higher up slightly, sugar segment margins have come down during the quarter

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 Triveni Engineering one of the most efficient sugar company in India with third largest sugar crushing capacity & sizable distillery capacity. With the recently announced capex, its distillery capacity would reach to 30-32 crore litres pa by November-2023. The soft operational result in last two quarter was mainly due to lower sugar recovery rate in 2021-22 season & muted domestic sugar realisation. However, we believe sugar recovery would improve in 2022-23 sugar season, which would reduce cost of production by Rs1/kg. Moreover, global white sugar prices are prevailing at Rs38-40 /kg (in INR terms) & Triveni can utilise its refined sugar capacity to its advantage by exporting refined white sugar in 2022-23 season. It is important to note that government has allowed 6 million tonnes of exports (industry wise) for the season in initial phase, which would be followed up by 2-3 million tonnes in January-February 2023 (according to sugar production). We remain positive on Sugar Industry as well as Triveni Engineering.

Impact:

Neutral