This capital goods company is gathering momentum with a big orderbook in hand

• The stock has given almost multibagger returns – of around 90% in the last one year.
• It has over 50% market share in India and is the second largest player globally.
• Over two years, its order inflow is expected to grow at 18% CAGR driven by demand from cement, steel, and biomass industries.
• It has no capex planned and works on a negative working capital as it receives advances from customers.
  

Bengaluru-based steam turbine maker Triveni Turbines has been gaining from the energy transition in Europe and other international markets as well as growth in the domestic industry. It’s sitting on a lifetime high orderbook of ₹1,400 crore and a robust enquiry pipeline.

The stock has given almost multibagger returns – of around 90% in the last one year, and analysts expect better run up ahead this year as it expands its product and service offerings. A recent report by Centrum Broking names it a ‘high-conviction stock’ with a target price of ₹435 while its currently trading at around ₹386.

Apart from the power generation sector, the company provides turbines for applications like waste to energy, combined heat and power generation and co-generation which cater to a wide variety of sectors like sugar, steel, paper, textiles, chemicals, palm oil, food processing and more.

It already has a dominant market position in the Indian market with over 50% market share and is the second largest player globally. Moreover, since steam turbines are customised products, it has also built a strong competitive moat, says Centrum Broking.

The growing book

Over the next two financial years, order inflow is expected to grow at 18% compounded annual growth rate (CAGR), driven by sectors such as cement, steel, process co-gen, biomass and distilleries in India; renewables and waste to energy in Europe; and biomass and process-cogen in South East Asia, says the brokerage firm.

“Our enquiry book has increased by about 56% for the domestic market in the first quarter. So, the international market and overall, our enquiry book has grown in excess of 22%. We're quite comforted by the fact that both enquiry books have grown,” said Nikhil Sawhney, vice chairman and managing director of Triveni Turbines in Q1 earning conference call.

A sweet spot

Its sweet spot however lies in its aftermarket services which is a high-margin business. “Triveni Turbines has materially scaled up after-market services by expanding the portfolio to cater to utility turbines, geothermal turbines and other rotating equipment. Order inflow is up 88% YoY ₹460 crore while sales grew 82% YoY to ₹410 crore in FY23,” said Centrum Broking.

The company's aftermarket sales grew at 91% over the previous corresponding period and contributed to 34% of total sales, up from 26% at the same time last year, in Q1. It’s also expanding its global footprint with regards to aftermarket sales as well

“The segment has been focusing on driving growth in the higher value-added components such as refurbishment and garnered good success in upgradation and efficiency enhancement orders in the quarter under review,” Sawhney said.

The company has no major capex plans ahead, unless it aims to enter a new product line. It also has cash reserves to the tune of ₹747 crore. The company operates on negative working capital – where they receive advances from customers leaving it with no burden to borrow, and its reserves include ₹400 crore of customer advances as well.