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Triveni Engineering and Industries Ltd

| Q3 & 9M FY26 Earnings Conference Call Transcript

BULLISH SENTIMENT

Report Source

⬤5th Feb 26

Summary : Triveni Engineering & Industries reported strong Q3/9M FY26 results driven by sugar and distillery, with positive outlooks for engineering exports and sugar prices, despite some operational challenges.

Management Perspective positive : Management expressed optimism about strong operating performance, a major turnaround in distillery, stable sugar prices, and a positive rebound in engineering orders. They believe 'all the bad news is pretty much out of the picture'.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 revenues increased 16.5% to ₹4,782.5 crore, PBT rose to ₹102.8 crore.
  2. 9M FY26 revenues grew 17.8%, driven by strong Sugar and Distillery segment performance.
  3. Distillery segment saw a major turnaround with higher sales volumes and lower maize procurement costs.
  4. Sugar segment improved due to higher sales, better realization, and cost optimization efforts.
  5. Engineering business turnover increased 15% in Q3 and 11% in 9M FY26, with PBT margins up 90 bps.

Future Growth Prospects

  1. Anticipate robust sugar pricing in coming quarters due to favorable demand-supply dynamics.
  2. Ethanol blending program is gaining traction, with potential for Cycle 2 and Cycle 3 tenders.
  3. Power Transmission business expects export growth and a rebound in domestic order bookings.
  4. Water business sees significant opportunities in recycle, reuse, and Zero LD projects.
  5. Demerger of Power Transmission business is expected to unlock value and improve operational efficiencies.

Management Insights

  1. Strong operating performance in 9M FY26, particularly in Distillery and Sugar segments.
  2. Cost of borrowings is trending downwards, with working capital substantially reduced.
  3. Sugar prices remained stable despite a significant ₹300/MT cane price increase in Uttar Pradesh.
  4. January showed a positive rebound in engineering order booking after a muted Q3.
  5. All negative factors in Distillery and Sugar segments are largely out of the picture.

Signs of Skepticism

  1. Management did not provide specific FY27 guidance for the Power Transmission business.
  2. Details on the work share for the LM2500 program with Rolls-Royce are still being drawn out.
  3. The full ramp-up potential of the defence facility is uncertain and depends on future order wins.
  4. Persistent operational issues at Sir Shadi Lal factory, despite management's resolution efforts.

Risk Factors

  1. Exceptional cost of ₹22.4 crore incurred due to new labor codes.
  2. International sugar prices are at near historic lows, impacting global sentiment.
  3. Potential curtailment of maize supply for ethanol in Cycle 2 tenders.
  4. Delayed decision-making in the engineering business due to global uncertainties.
  5. Operational challenges at Sir Shadi Lal factory, including pests and breakdowns.

Good To Know

  1. Consolidated gross debt stood at ₹1,073 crore as of December 31, 2025.
  2. Ethanol constituted 92% of alcohol sales in Q3 FY26, up from 89% in Q3 FY25.
  3. The demerger scheme for Power Transmission business was approved by shareholders in December 2025.
  4. The defence manufacturing facility has commenced operations, with further development underway.
  5. Sugar recovery improved to 10.5% in December 2025 from 9.1% last year due to healthier cane.

Key Drivers

  1. Strong sugar pricing due to lower stock.
  2. Improved distillery profitability from lower costs.
  3. Increased engineering export order bookings.
  4. Demerger to unlock Power Transmission value.

Key Analyst Discussions

Competitive Environment

  1. Triveni's manufacturing cost for turbo gearing is 25-30% lower than European competitors.
  2. Triveni offers 6-8 month ex-factory delivery times, significantly faster than European competitors' 12+ months.
  3. The company is gaining market share in export markets for compressors and pumps.

Market Trends & Consumer Behavior

  1. Indian Navy's decision on gas turbine vs. diesel propulsion for new vessels is expected soon.
  2. Sugar prices are anticipated to rise if closing stock approaches 6 million metric tonnes.
  3. Government may consider increasing the Minimum Support Price (MSP) for sugar.
  4. Historical data suggests El Nino years have not consistently led to lower rainfall in India.

Financial Highlights

  1. PTB inquiry book is strong, but Q3 order conversion was weak; January saw a rebound.
  2. Maize prices are currently around ₹20-₹20.5/kg, down from October levels.
  3. Q4 booking is expected to be robust, potentially covering the Q3 shortfall.
  4. Sir Shadi Lal factory is anticipated to be loss-making in FY26, with a turnaround expected next year.

Product Composition

  1. Gas turbine applications for gearboxes are seeing increased traction, especially in exports.
  2. The largest application for high-speed gearboxes is 90 megawatts.
  3. The defence facility will produce fin stabilizers, gearboxes, propulsion equipment, and deck machinery.
  4. Multi-feed distilleries provide flexibility to use various feedstocks like rice, B-heavy, and C molasses.

Strategic Considerations

  1. MoU with Rolls-Royce for 4MW marine gas turbine generators is at the architectural stage.
  2. Triveni will undertake some manufacturing portions if the gas turbine option is selected by the Navy.
  3. The company is making small investments in sugar to improve cost of production and efficiency.
  4. The Power Transmission business is undergoing digital transformation, including CRM and SAP HANA implementation.