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Triveni Engineering reports Strong profitability aided by higher sugar prices, ethanol volumes

News: Consolidated revenue remain flat (1.1% dip) at Rs.1155 crore. Sugar sales were down 16.1% mainly due to lower domestic sales quota during the quarter. The company received 2.16 lakh tonnes of domestic quota as against 2.41 lakh tonnes in the corresponding quarter. However, sugar prices have moved up from Rs.33 / kg to |37/kg in last four months.  Distillery revenues increased by 84.1% on the back of higher distillery volumes & increasing proportion of B-heavy ethanol. Moreover, we believe liquor volumes are increasing at a fast pace (excise duty up 16% sequentially). Operating profit increased by 37.8% to Rs.107.3 crore mainly on the back of higher sugar prices and increasing distillery volumes. Interest cost is down from Rs.14.1crore in corresponding quarter to Rs.12.1 crore in Q2FY22. The company was able to reduce debt by Rs.410 crore in last six months. Its total debt remains close to Rs.580 crore and inventory levels is Rs.862 crore

Views: Sugar industry has seen significant reduction in sugar inventory in last one year, which along with the increasing sugarcane diversion towards ethanol is leading to increase in sugar prices. Triveni has been largely benefited by relatively better sugarcane  availability in 2020-21 sugar season, ramping up of ethanol capacities & higher domestic sugar prices. Moreover, it has also see some revival in engineering business in last six months. We believe domestic sugar prices would remain firm above Rs.35/ kg for the rest of the FY22, which would boost the profitability. Moreover, with the commissioning of new distilleries, the company would be able to divert more sugarcane towards the production of ethanol. We remain positive on the sector as well as on company.