Triveni Engineering (TEL) is one of the largest sugar companies in India with sugar crushing capacity of 60,000 TCD, distillery capacity of 660 KLD & co-generation power of 104 MW. It also has power transmission & waste water management business contributing 10% to revenues.
TEL saw 18.2% sales jump led by strong sugar, ethanol volumes.
TEL’s share price has gone up 176% in the last five years (from Rs 85 in August 2017 to Rs 236 in August 2022).
We value the stock at Rs 350, valuing the business at 14x FY24 PE
We also like Dwarikesh Sugar in our sugar coverage.
|Key Financials||FY20||FY21||FY22||5 Year CAGR % (FY17-FY22)||FY23E||FY24E||(Blank)||CAGR % (FY22-24E)|
|Total Operating Income||4,436.6||4,674.2||4,291.0||8.7||5,136.3||5,417.8||-||12.4|
|EBITDA Margin %||12.2||11.9||14.8||-||14.9||17.1||-||-|
Q1FY23 Results: Post capex, distillery volume to reach 3x to 35 crore litre
Triveni Engineering is one of the most efficient sugar company in the country with sizable crushing capacity. With the current announcement of distillery capex, the company would be utilising sugarcane juice route to produce ethanol supplemented by grain based ethanol production. It’s sugar realisation is also better compared to other sugar millers given 45% of its sugar production is refined sugar. With the increasing sugarcane diversion towards ethanol & aggressive exports of 11 million tonnes, sugar inventory in the country would reach to 5.5 million tonnes by September 2022, which would keep sugar prices firm above Rs 35 / kg. However, we believe sugarcane production by farmers is also increasing at a faster pace. We believe sugar industry in India is required to further increase distillery capacities to utilise excess sugarcane to produce ethanol. We believe Triveni’s capex announcement is the step in right direction. We maintain our BUY recommendation and target price of Rs 350 / share, valuing it at 14x FY24E PE.
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