>Triveni Engineering (CENTRUM)

Sugar business boosts earnings

■ Results in-line with expectations: The upturn in sugar prices helped boost sugar revenues 47.5% YoY. However, the 9.1% de-growth in engineering revenues restricted overall sales growth to 21.0%. Margins expanded 68bp and PAT was Rs 378mn vs. our estimate of Rs401mn.

■ Target price revised: We have revised our target price valuing the company on FY10E. Appling a P/E multiple of 7.1x (a 15.0% discount to our earlier FY09E multiple), our target price works out to be Rs 69 ( previous Rs 67)

■ Robust sugar performance: Higher sugar prices (up 35.8% YoY) and higher volumes coupled with better prices of ancillary products helped sugar revenue to grow by 47.5%. Inventory gains on sugar led to a turnaround PBIT margin from 0.6% to 15.7% YoY.

■ Engineering revenue recovering: Revenue from engineering business fell 9.1% YoY. However, the 40% QoQ growth strengthens our confidence in recovery in the sector. The company’s order-book stood at Rs7.7bn, flat on QoQ basis.

■ Maintain Buy: We maintain our Buy rating on the stock. At CMP, the stock trades 7.1x FY09E and 5.5x FY10E. We have revised our target price to Rs69 (from Rs67 earlier), representing a 29.1% upside potential.

To see full report: TRIVENI ENGINEERING