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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��UBS Investment Research
First Read: Triveni Engineering
Sugar exports – positive for Triveni
„ Event: Government has allowed sugar exports of 0.5 mio Tonnes
The government has allowed sugar exports during FY11 (Oct 2010 – Sept 2011).
This should help improve sugar prices. Sugar contributes 80% of revenue and 65%
of EBIT for Triveni Engineering. Government allowing higher sugar exports is
also an indication of favourable policy view.
„ Impact: Can help improve profitability of Sugar division
Better sugar realization will help improve profitability of the sugar division. We
estimate every 0.25Rs/kg increase in Sugar price increases Triveni’s FY12 PAT by
7%.
„ Action: Reiterate Buy rating and maintain price target
We retain our estimates and reiterate our Buy rating on Triveni Engineering and
maintain our Rs.85 price target.
„ Valuation
We derive our price target from a sum-of-the-parts-based methodology, using a
multiples-based approach. We value the engineering division at 14x 2012E PE and
the sugar business at 1x 2011E P/BV.
Q 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.
Q Statement of Risk
We believe TREI faces several risks including: a slowdown in industrial capex,
which could have an adverse impact on TREI’s revenue growth rate as would
volatile sugar prices
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��UBS Investment Research
First Read: Triveni Engineering
Sugar exports – positive for Triveni
„ Event: Government has allowed sugar exports of 0.5 mio Tonnes
The government has allowed sugar exports during FY11 (Oct 2010 – Sept 2011).
This should help improve sugar prices. Sugar contributes 80% of revenue and 65%
of EBIT for Triveni Engineering. Government allowing higher sugar exports is
also an indication of favourable policy view.
„ Impact: Can help improve profitability of Sugar division
Better sugar realization will help improve profitability of the sugar division. We
estimate every 0.25Rs/kg increase in Sugar price increases Triveni’s FY12 PAT by
7%.
„ Action: Reiterate Buy rating and maintain price target
We retain our estimates and reiterate our Buy rating on Triveni Engineering and
maintain our Rs.85 price target.
„ Valuation
We derive our price target from a sum-of-the-parts-based methodology, using a
multiples-based approach. We value the engineering division at 14x 2012E PE and
the sugar business at 1x 2011E P/BV.
Q 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.
Q Statement of Risk
We believe TREI faces several risks including: a slowdown in industrial capex,
which could have an adverse impact on TREI’s revenue growth rate as would
volatile sugar prices
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