>TRIVENI TURBINES LIMITED & GE Triveni Limited (GET) Joint Venture between General Electric and TTL (AMSEC)

Consolidating domestic presence, Ready for the global play

Triveni Turbine Limited – Set for the big leap

■ Well entrenched in 0-30MW segment
TTL enjoys ~60% of the domestic market share in the 0-30MW segment (market size of ~1,500MW). In the sub-20MW range, the company commands ~75% market share, while in the 20-30MW range it’s market share stands at ~35%.


■ Strategic partnership with GE – The game changer
To expand its product portfolio to the 30-100MW range and diversify its geographical reach, TTL partnered with GE Oil & Gas to form a 50:50 joint venture (JV) company, GE Triveni (GET). We believe the JV will enable TTL to leverage the GE brand name and technologies to scale up to the 30-100MW segment (domestic market size of ~2,500MW, global opportunity of ~20,000MW).


■ Attractive valuations – Poised for high growth
The GET JV is expected to propel TTL’s revenues and profitability, going forward.TTL is currently valued at 11x FY13E EPS (solely attributable to the 0-30MW segment). Given that TTL is operating at negative working capital, has robust operating cash flows, high return ratios and will be zero debt by 1HFY13, we have valued it at 15x FY13 EEPS. We recommend Buy, with a Target Price of `45.


INVESTMENT ARUGUMENTS

 ■ Strong footing in domestic market, Export pie steadily expanding
- Enjoys dominant market share of ~75 % in the sub-20MW range. Market share in 20-30MW segment ~35%.
- Domestic market potential in 0-30MW range ~1,500MW (~USD 200mn) is growing at 10-15%.
- Exports constitute ~11% of turnover. Going forward, TTL expects to derive ~35% of product revenues from exports.
 
■ Strategic partnership with GE – The game changer
- Leveraging the GE brand name and technologies to scale up the 30-100MW segment.
- Domestic market potential in the 30-100MW segment is ~2,500MW (~USD 300mn) and is growing at 7-10%.
- Global opportunity ~20,000MW equivalent to USD 2.5bn.


■ Diversified presence across industries and geographies
- TTL’s steam turbine solutions has been installed across 18 industry segments.
- ~2,500 turbines installations in over 30 countries.
- Typical installations include sugar cogeneration, combined heat & power (CHP), waste heat recovery (WHR), captive power plants (CPP) and independent power projects (IPP).
 
■ Thriving after sales business
- Aftermarket services constituting ~16% of total revenues fetch superior EBITDA margins of ~45%.


■ Robust financials
- Blended EBITDA margins of ~22%
- Operates at negative working capital
- Robust operating cash flows
- Set to become Zero debt by September 2012
- Generates high RoCE and RoE




To read the full report: TRIVENI TURBINES LTD
RISH TRADER