Triveni bucks cap goods trend big time

At a time when capital goods companies are facing the double whammy of few new orders and declining margins on the back of intense competition, Triveni Turbine Ltd stands out as an exception.

The company’s market capitalisation has grown 30% in the last nine months. Not without reason. It has clocked an Ebitda margin of 27.3% and profit before tax margin of 25.9% in the third quarter, which is not only best in India but also one of the best at global level.
This is not a one-off performance as company has consistently performed better than its peers on the margin front.

Rival Thermax acknowledged this during a recent analyst call, calling Triveni one of the foremost in terms of profit margins.

A switch in product sales that skewed towards higher export coupled with an increase in after-market services and favourable exchange rate helped the company improve PBT margins by over 400 basis points, said a report released by Asian Market Securities.
Despite sluggish domestic markets, Triveni not only managed to retain market share but also reported robust order inflow of `120 crore with exports accounting for 38% of it.
The management also cited healthy growth of 10% in after market service and 158% growth in export business for margin improvement.

Triveni is mainly active in captive power front where demand for turbine is up to 30 mw and market potential of captive sector is not large enough to attract big players that makes Triveni a market leader with pricing power, said an analyst.

Nirav Vasa, capital good analyst, SBI Cap Securities, said Triveni has the first-mover advantage in the captive turbine sector and it also scores high on the back of its joint venture with General Electric.

“The Triveni-GE joint venture is based on an asset-light model where existing lines of business were expanded by Triveni. This did not require large capex and its manufacturing units were already established and operational leading to a boost in margin and bottomline,” Vasa said.