Triveni Engineering is a good buy

Triveni Engineering & Industries is a growing corporation engaged in the business of sugar and engineering. The company is one of the largest integrated sugar manufacturers in the country and a market leader in its engineering business, comprising high speed gears, gearboxes, and water treatment solutions. Triveni currently has seven sugar mills in operation at Khatauli, Deoband, Sabitgarh (all in western Uttar Pradesh), Chandanpur, Rani Nangal and Milak Narayanpur (all in central Uttar Pradesh) and Ramkola (eastern Uttar Pradesh). While the company’s gears manufacturing facility is located at Mysore, the water and waste water treatment business is located at Noida. The company currently operates three grid-connected co-generation plants and three incidental co-generation plants, located across five sugar units, and one of the largest single stream molasses based distillery in India, at Muzaffarnagar. The company produces premium quality multi-grade plantation and refined sugar, which is supplied to household consumers and other bulk consumers. Triveni has a supply chain relationship with leading multinational beverage, food, FMCG companies and pharmaceutical companies. The distillery has a flexible manufacturing process, allowing it to produce ethanol and other spirits. The company is also one of the leading solutions providers for water treatment, wastewater treatment and the recycle of water. Advanced solutions offered for total water management include turnkey, customer care, operations and maintenance, life cycle models such as design, build own and operate. The customer care division offers value added services for operation management and performance optimisation, while the quality service offering are tailored to customers’ requirements. The turbine business of the company, which is located at Bengaluru, has been de-merged through a scheme of arrangement into a separate listed entity, Triveni Turbine Ltd, during FY 2010-11. 

Triveni Engineering & Industries Ltd holds a 21.80% equity stake in Triveni Turbine Ltd. The company crushed record sugarcane at 6.4 million tonnes, which is an increase of 42% from the sugar season of 2016-17. The sugar realisation has shown a marked improvement of 6% quarter-over-quarter, with the average realisation for Q1 FY18 at Rs 36,890 per tonne, whereas current sugar prices are in the range of Rs 37-38 per kg. The significant improvement in the quarterly performance has been mainly attributed to the sugar business, due to robust sugar realisation prices, coupled with low cost of goods, and increase in volume sugar dispatches, resulting in better profitability. During the quarter, the company repaid total debts amounting to Rs 1,140 million. On account of longer sugar operations, the co-generation operations during Q1 FY18 have been significantly higher, in comparison to Q1 FY17. 

The outlook for the company is very promising with earnings expected to grow at a healthy pace over the next two years. Analysts are expecting the stock price to appreciate by nearly 30% over the next six-nine months from the current market price of Rs 95.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.