Developing CO₂-based Turbines And US Expansion Will Drive Future Success

Key Takeaways

• Growth in export orders and higher megawatt market expansion could drive significant international and local revenue increases.
  
• Investing in R&D and aftermarket services is poised to diversify offerings, enhance margins, and support long-term growth.
  
• Triveni Turbine's revenue stability is challenged by domestic stagnation, underperforming exports in certain regions, and upcoming losses from U.S. expansion.

Catalysts

Manufactures and supplies power generating equipment and solutions in India and internationally.

• Triveni Turbine is experiencing a growth trajectory in export order bookings, which increased by 50% year-over-year and are expected to drive future revenue growth with the international market holding a significant portion of the order book.
  
• The company is investing in R&D and developing new technologies, such as CO2-based turbines, to diversify its product offerings, potentially supporting long-term revenue growth and enhancing margins.
  
• With the expansion into higher megawatt categories and the successful completion of large orders, there is potential for increased market share and revenue in both the local and international markets.
  
• The Aftermarket business is growing, with increased demand for refurbishments and service contracts contributing significantly to revenue and offering higher margins compared to new products.
  
• Establishing a presence in the U.S. market could increase future revenue through both new product sales and aftermarket services, as the subsidiary ramps up operations and begins contributing to the company’s financials.

Triveni Turbine Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Triveni Turbine's revenue will grow by 20.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 17.0% today to 17.5% in 3 years time.
• Analysts expect earnings to reach ₹5.6 billion (and earnings per share of ₹18.05) by about January 2028, up from ₹3.2 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting ₹6.7 billion in earnings, and the most bearish expecting ₹4.4 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 66.0x on those 2028 earnings, down from 69.1x today. This future PE is greater than the current PE for the IN Electrical industry at 46.8x.
• Analysts expect the number of shares outstanding to decline by 0.69% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.28%, as per the Simply Wall St company report.

Triveni Turbine Future Earnings Per Share Growth

Risks

• The domestic order booking for Triveni Turbine has been relatively flat, impacted by election situations, raising concerns about domestic revenue growth in the short term.
  
• Growth in exports has been a major contributor, but some geographic areas such as Southeast Asia have underperformed, which could affect overall revenue growth stability.
  
• The company's plan to establish operations in the U.S. is projected to result in losses above ₹25 crores this financial year, impacting short-term earnings.
  
• The company faces industry-wide challenges such as growing competition and technological advances from global competitors, which may pressure margins and market share.
  
• The potential for softened demand exists due to economic cycles and external factors impacting inquiry pipelines, which could result in inconsistent revenue and margin trajectories.

Valuation

• The analysts have a consensus price target of ₹798.62 for Triveni Turbine based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹880.0, and the most bearish reporting a price target of just ₹610.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹32.2 billion, earnings will come to ₹5.6 billion, and it would be trading on a PE ratio of 66.0x, assuming you use a discount rate of 14.3%.
  
• Given the current share price of ₹684.35, the analyst's price target of ₹798.62 is 14.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.