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UBS Investment Research
Triveni Engineering & Industries
Demerger to drive value unlocking
Event: High court approved demerger of turbine division
The high court approved demerger of Triveni Turbines from Triveni Engineering.
We had discussed this demerger in our initiation note. Once the demerger is
completed Triveni Turbines will be separately listed on the stock exchanges.
Impact: Demerger to unlock shareholder value
We believe that the demerger will unlock shareholder value. Post demerger,
Triveni Engineering shareholders will continue to hold 22% of Triveni Turbines
and 78% will be spun off to existing shareholders of Triveni Engineering. Triveni
Turbines will be separately listed on the stock exchanges.
Action: Maintain our estimates and reiterate Buy
We maintain our revenue and profit estimates.
Valuation: SOTP based valuation methodology
We derive our price target from a sum-of-the-parts-based methodology, using a
multiples-based approach. We value the engineering division at 12.5x PE and the
sugar business at 1x P/BV.
The court approved demerger of Triveni
Turbines Limited
The Allahabad High Court has approved the demerger of Triveni Turbines
Limited from Triveni Engineering Limited. Subsequent to the demerger,
Triveni Engineering Limited will continue to hold 22% of Triveni Turbines Ltd
and remaining 78% will be spun off to shareholders of Triveni Engineering.
Triveni Turbines will be listed separately on the stock exchanges.
Triveni Engineering & Industries
Triveni Engineering & Industries, an engineering and sugar manufacturing
company in India, operates two divisions. The engineering division
manufactures small turbines, high-speed gearboxes and executes water treatment
projects. The sugar division operates sugar mills, cogeneration power plants and
distilleries in the northern state of Uttar Pradesh.
Statement of Risk
We believe TREI faces several risks, including: limited liquidity for TREI once
it spins off Triveni Turbines; a slow down in industrial capex, which could have
an adverse impact on TREI’s revenue growth rate as would volatile sugar prices.
TREI is also exposed to the cyclicality of sugar production—its FY10 EPS fell
YoY because of this.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Triveni Engineering & Industries
Demerger to drive value unlocking
Event: High court approved demerger of turbine division
The high court approved demerger of Triveni Turbines from Triveni Engineering.
We had discussed this demerger in our initiation note. Once the demerger is
completed Triveni Turbines will be separately listed on the stock exchanges.
Impact: Demerger to unlock shareholder value
We believe that the demerger will unlock shareholder value. Post demerger,
Triveni Engineering shareholders will continue to hold 22% of Triveni Turbines
and 78% will be spun off to existing shareholders of Triveni Engineering. Triveni
Turbines will be separately listed on the stock exchanges.
Action: Maintain our estimates and reiterate Buy
We maintain our revenue and profit estimates.
Valuation: SOTP based valuation methodology
We derive our price target from a sum-of-the-parts-based methodology, using a
multiples-based approach. We value the engineering division at 12.5x PE and the
sugar business at 1x P/BV.
The court approved demerger of Triveni
Turbines Limited
The Allahabad High Court has approved the demerger of Triveni Turbines
Limited from Triveni Engineering Limited. Subsequent to the demerger,
Triveni Engineering Limited will continue to hold 22% of Triveni Turbines Ltd
and remaining 78% will be spun off to shareholders of Triveni Engineering.
Triveni Turbines will be listed separately on the stock exchanges.
Triveni Engineering & Industries
Triveni Engineering & Industries, an engineering and sugar manufacturing
company in India, operates two divisions. The engineering division
manufactures small turbines, high-speed gearboxes and executes water treatment
projects. The sugar division operates sugar mills, cogeneration power plants and
distilleries in the northern state of Uttar Pradesh.
Statement of Risk
We believe TREI faces several risks, including: limited liquidity for TREI once
it spins off Triveni Turbines; a slow down in industrial capex, which could have
an adverse impact on TREI’s revenue growth rate as would volatile sugar prices.
TREI is also exposed to the cyclicality of sugar production—its FY10 EPS fell
YoY because of this.
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