Buy Triveni Engineering and Industries: target of Rs 125: Sharekhan

Sharekhan is bullish on Triveni Engineering and Industries has recommended buy rating on the stock with a target price of Rs 125 in its research report dated April 13, 2021.

An Edelweiss research report for Q4FY21 says road tonnage continued to improve, evident in e-way bill generation (up 6% QoQ) and improved core trucking rentals. “We estimate tonnage would increase by three–five percent for truckers. Asset-light plays Mahindra Logistics and TCI Express remain our preferred picks due to their ability to scale up/down as the environment demands,” the report said. Edelweiss is bullish on Blue Dart Express due to the pandemic-induced boom in e-commerce and its leaner cost structure. It has retained a ‘buy’ call on Mahindra Logistics, TCI Express and Blue Dart Express.

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Sharekhan’s research report on Triveni Engineering and Industries

With the government focusing on achieving ethanol blending of 20% by CY2025; India’s ethanol requirement will increase significantly (4-5 billion litres required for 10% blending). TEIL is adding 160 KLPD B-Heavy/Cane juice and a 40 KLPD grain-based distillery (to be operational by Q3FY22). With augmentation of distillery capacity, distillery revenues will clock a 21% CAGR with realisation inching up to Rs. 52 per litre; margins to also improve in the coming years. With improvement in profitability and stable working capital; free cash flow (FCF) is expected to improve (cumulative FCF of ~Rs. 2,060 crore likely over FY20-23) and aid better dividend payouts/ prudent buyback policy.

Outlook

We maintain a Buy on Triveni Engineering & Industries (TEIL) with revised target price of Rs. 125. Attractive valuation of 4.7x versus historical average of 6.3x and changing industry dynamics make it better play in the sugar segment.

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