UBS:Triveni Engineering - Sugar at cyclical trough, deregulation a potential catalyst

Please Share::  India Equity Research Reports, IPO and Stock News

Visit http://indiaer.blogspot.com/ for complete details �� ��

UBS Investment Research
Triveni Engineering & Industries
Sugar at cyclical trough, deregulation a
potential catalyst
􀂄 Management meeting takeaways—Sugar at cyclical low in FY11
We met the Triveni Engineering management team. We think the sugar division is
at a cyclical trough and expect it to post 41% improvement in EBITDA in FY12.
We believe the drivers are higher free market sugar prices, lower mix of levy
sugar, and higher sugar recovery rates for Triveni Engineering.
􀂄 Revised estimates to factor in lower revenue growth rate for Water
As a result of slower capex by the power sector as well as by government bodies,
we are lowering our estimate of growth rate for the Water division.
􀂄 Gear to continue to be strong due to expansion in addressable market
Triveni Engineering has entered into a technology tie-up with Lufkin to launch
low-speed high-precision gear. These products will focus on the rubber, steel,
metals and cement, power and marine industries. As per the company, the
opportunity for high-precision low-speed gear is 2-3x that for high-speed gear, and
import substitution should propel growth of the low-speed gear division.
􀂄 Valuation: Buy rating, Rs80 price target
We derive our price target from our sum-of-the-parts-based methodology, using a
multiple-based approach. We value the engineering division at 14x PE and the
sugar business at 1x P/BV. We lower our price target to Rs80 to reflect the lower
growth rate for the Water division.

See full list -click link below:

UBS Mid-Caps Strategy - What to Buy? �� Oct 2011 Update