Triveni Turbine stock has jumped 78% since June; brokerages say stock remains a good value buy

Shares of Triveni Turbines have seen sharp gains in the last four months. The stock hit its 52-week low of ₹146.90 on June 17, 2022, and since then it has jumped almost 78% as of October 10. The stock hit its 52-week high of ₹271.90 on BSE on October 4, 2022.

The stock's sharp gains can be attributed to its healthy fundamentals. Many brokerages and analysts believe that the stock is a long-term value buy.

Brokerage firm Centrum Broking has initiated coverage on the stock with a buy rating, pegging the target price of ₹315, implying a 21% upside from the stock's October 10 closing of ₹260.80 on BSE.

The company is a renowned player in the 0-30MW industrial steam turbines As Centrum Broking highlighted, Triveni enjoys a leadership position in India (50% market share) and is the second largest globally (20% market share).

Technology-driven, customized and engineered product offering gives it a key edge, ably supported by large exports (43% of total sales over FY16-22) and highly profitable after-market services (25% of total sales over FY16-22), Centrum pointed out.

The brokerage firm highlighted that a healthy capex revival in the domestic market has been instrumental in a sharp upsurge in Triveni’s order inflows. As per Centrum, Triveni’s order inflow jumped to ₹1,180 crore in FY22 ( ₹710 crore domestic and ₹470 crore exports) versus an average annual inflow of ₹770 crore ( ₹410 crore domestic and ₹360 crore exports) over FY16-21.

"We expect 14% CAGR in order inflows over FY22-25E led by strong capex momentum in India (cement, steel, process co-gen, biomass and distilleries sectors), Europe (renewables and WTE) and South East Asia (biomass and process-cogen)," said Centrum.

The company has new growth avenues of 30-100MW turbines, API turbines and global REFURB.

"The global 30-100MW market has become a new large opportunity for Triveni with a market size of 7GW, 1.5 times 0-30MW, with Europe and South East Asia (3GW market) being key focus areas. API turbines (used at refineries to drive pumps, compressors, etc.) offer a large opportunity. Triveni has received certifications and approvals from global and Indian consultants(nearly 10% of the order book currently). Triveni REFURB brand’s overseas expansion in refurbishing old turbines and servicing larger utility turbines can aid growth and margin," said Centrum.

Positive fundamentals make the stock worth buying and on the valuation front, Centrum believes the stock has the potential to command a 15% premium.

"Over FY16-22, Triveni has traded at an average P/E of 35 times. With rising industrial capex in India, strong growth expectations (FY22-25E revenue/earnings CAGR of 24%/56%), and a superlative financial profile, we believe Triveni can command a 15% premium," said Centrum.

In September, another brokerage firm Anand Rathi Share and Stock Brokers also initiated coverage on the stock with a buy call, fixing the target price of ₹285.

It said given the strong carry forward order book proposition and robust enquiry, increase in the addressable market, industry-leading market share and capacity increase Triveni is all set to enter the next leg of growth.

"The company believes that the outlook for product order booking in the near term is strong, on the back of its healthy enquiry pipeline. The management guided sustained nearly 35% revenue growth for next few years and aim to maintain the PBT above 20% on the back of execution of high margin export business and cooling off commodity prices," said Anand Rathi.

Technicals

Technical indicators show some signs of exhaustion after a steep rise in stock prices. Analysts say the long-term outlook is healthy but for the short term, investors can book some profit.

Jigar S. Patel, Senior Manager - Equity Research, Anand Rathi Share and Stock Brokers pointed out that at the current juncture, the stock is trading near its crucial resistance zone of ₹270- ₹280 which is also near 1.618 extensions (one of the extreme ratios in the harmonic arsenal).

"Volume is dropping as the price is increasing which is an anomaly with respect to volume price analysis. On the Indicator front, the weekly MACD is overstretched which is a sign of early caution. One can book some profits at current levels and other higher levels (i.e ₹280) if achieved. Fresh buying as of now is not advised," said Patel.

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher pointed out that the stock has seen a good run in the past four months indicating a breakout recently above ₹240 and thereafter showing resistance near the ₹272 level with an overall strong bias.

“The near-term support would be ₹240 and if it sustains it, one can add further for fresh upside targets of ₹280-285 levels. Only a decisive breach below ₹220 (50 exponential moving average levels) would weaken the bias and one can think of squaring off their position. The 200DMA (daily moving average) lies at ₹190 and the major strong trendline support lies near ₹170 levels,” said Parekh.

According to a MintGenie poll, an average of 5 analysts have a ‘strong buy’ call on the stock.

Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.