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Triveni Engineering and Industries Ltd

| Q4 FY26 Earnings Conference Call Transcript

BULLISH SENTIMENT

Report Source

⬤9th Jun 26

Summary : Triveni Engineering & Industries reports strong FY26 revenue growth driven by distillery and sugar, with robust future prospects in power transmission, defence, and water, despite some Q4 challenges and policy uncertainties.

Management Perspective positive : I'm delighted to inform you that the composite scheme of arrangement is effective. The future, very honestly speaking, actually holds great promise for this business. I'm personally very excited about the next path of that business as well.

Concall Report Analysis & Insights

Business Overview

  1. Revenues grew 10.6% to ₹6,291 crore in FY26, driven by sugar and distillery.
  2. PBT stood at ₹378 crore, with a strong turnaround in the Distillery segment.
  3. Power Transmission Business saw 25% higher order booking, but engineering was impacted by global uncertainty.
  4. Water business revenues increased 15% to ₹270 crore, with a strong order book.
  5. Net profit for FY26 reached ₹268.7 crore, up 12.8% year-over-year.

Future Growth Prospects

  1. Power Transmission has a robust order book and strong enquiry pipeline, especially for exports.
  2. Defence manufacturing facility and axial compressor test gearbox order open new high-value opportunities.
  3. Ethanol business expects higher blends and further allocations from OMCs and private tenders.
  4. Water segment anticipates more orders due to stricter environmental norms and ZLD requirements.
  5. Sugar business expects better performance from cane development and higher recovery rates.

Management Insights

  1. Composite scheme of arrangement is effective, and credit rating reaffirmed as AA+ Stable.
  2. Sugar business delivered stable profitability despite agricultural challenges and lower crush.
  3. Distillery segment achieved outstanding operational turnaround with highest ever production and sales volume.
  4. Power Transmission order book is strong, providing distinct revenue visibility.
  5. Aftermarket business is a compelling proposition, offering upgrades and technological solutions.

Signs of Skepticism

  1. Management acknowledges government policy unpredictability in ethanol, but remains optimistic.
  2. Q4 power transmission business was a 'blip' due to global changes, but future outlook is strong.
  3. Specifics on future CapEx for sugar/distillery are vague, focusing on cost reduction rather than expansion.
  4. No forward-looking numbers or estimates provided for specific segments.

Risk Factors

  1. Agro-climatic factors and diversion to jaggery impacted sugarcane crush in FY26.
  2. Global and domestic uncertainty affected the engineering business in Q4.
  3. Government policy on ethanol pricing and feedstock allocation remains a concern.
  4. Potential impact of El Nino on monsoon and water stress in certain regions.
  5. Rupee depreciation could impact maize export prices, affecting distillery costs.

Good To Know

  1. Board recommended a final dividend of ₹1.25 per equity share.
  2. Consolidated debt stood at ₹2,148 crore, with long-term debt at ₹472 crore.
  3. ICRA reaffirmed long-term credit rating as AA+ Stable.
  4. Demerger of Power Transmission business is approved, with TPTL listing expected by end of August 2026.
  5. Company is investing in drone and satellite technology for better cane yield prediction.

Key Drivers

  1. Strong Power Transmission order book
  2. Growing ethanol blending program
  3. New defence sector opportunities
  4. Robust water business demand

Key Analyst Discussions

Competitive Environment

  1. RENK's entry has not changed competitive positioning; Triveni's value proposition remains strong.
  2. Aftermarket team provides compelling solutions, including upgrades for other gearboxes.
  3. Triveni aims to be on approved vendor lists for global gas market OEMs.
  4. Company has full gamut of high-speed gearbox technology, no need for external partnerships.
  5. Aftermarket service is a key competitive strength, offering faster delivery than global firms.

Market Trends & Consumer Behavior

  1. Government bodies are actively formulating policies for 'Beyond E20' ethanol applications.
  2. El Nino concerns could impact monsoon and water stress in central and southern India.
  3. Uttar Pradesh planting concluded early, with anticipated increase in cane area.
  4. Domestic industry re-evaluated CapEx in Q3/Q4, but Q1 FY27 shows increased enquiries.
  5. Rupee depreciation makes exports more competitive for Power Transmission.

Financial Highlights

  1. Crushing numbers for FY26 were 825 lakh quintals with 11.06% gross recovery.
  2. Water business order inflow for the year was ₹165 crore.
  3. Maize landed cost is much lower than last year, improving distillery margins.
  4. Distillery conversion costs have significantly decreased, improving profitability.
  5. Total receivables are about ₹500 crore, with ₹125-₹150 crore from water business.

Product Composition

  1. Grain-based feedstock constituted 56% of total ethanol sales in FY26.
  2. Maize contributed about 33% to ethanol production, down from 44% due to FCI rice allocation.
  3. Higher mix of FCI rice allocated ethanol led to slightly lower average realization prices.
  4. Maize offers the largest margin for ethanol production, followed by C molasses.

Strategic Considerations

  1. Defence CapEx of ₹78 crore incurred for defence facility, with more pending.
  2. Company is targeting defence and aftermarket business for indigenization opportunities.
  3. Power Transmission aims for over 50% exports in the near future.
  4. CapEx in sugar is focused on lowering production costs, not greenfield expansion.
  5. Shamli distillery unit will add capacity and top line without new CapEx.