Triveni Engineering Q1 Review: Challenges Persist Despite Revenue Growth

Triveni Engineering and Industries Ltd. reported a 22.9% year-over-year (YoY) revenue growth to Rs 16.0 billion, beating estimates by 12.4%. However, gross margins declined to 20.1% due to higher production costs stemming from lower sugar recovery in SS25.

Revenue Growth vs. Margin Pressure

The company’s revenue growth was driven by higher average sugar realizations, but this was not enough to cushion the margin pressure. Ebitda margin dropped to 3.3%, and profit after tax (PAT) stood at a muted Rs 22 million compared to Rs 310 million in Q1 FY25.

Sugar Recovery Remains a Challenge

The company’s continued reliance on the 0238 sugarcane variety, which is susceptible to red rot, remains a structural issue. Exposure to this variety is expected to reduce only to <40% by SSY26, which is likely to cap margin recovery at current sugar and ethanol price levels.

Brokerage View: Cautious Stance Maintained

Despite a 20%+ correction in the stock price, the core business challenges remain. Given the ongoing margin headwinds, the brokerage remains cautious and maintains a Reduce rating, citing limited downside from current levels.

Target Price Revised Downward

The brokerage has revised its earnings and margin assumptions downward and set a new SOTP-based Target Price of Rs 342, down from Rs 373.

Investor Takeaways

Indian investors and traders should remain cautious when evaluating Triveni Engineering’s stock, given the ongoing challenges in the sugar industry. While higher sugar prices are anticipated, a meaningful re-rating hinges on an increase in ethanol realizations.

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