Triveni Turbine export orders and US data centres support recovery after margin pressure

Investment View and Valuation

Motilal Oswal Financial Services retains a Buy recommendation on Triveni Turbine despite substantial margin underperformance in 1QFY27. The broker expects near-term margin weakness to continue until the low-margin strategic NTPC CO2-based energy-storage order is completed. However, it expects margins to improve from 2HFY27 as execution increases in the higher-margin export and aftermarket order books.

Motilal Oswal has reduced its FY27E and FY28E earnings estimates by 17% and 7%, respectively, primarily to reflect lower margins in 1HFY27. The revised target price is Rs 680, compared with the earlier target of Rs 750, based on 40 times two-year forward estimates. The target implies upside from the CMP of Rs 601.

1QFY27 Financial Performance

Triveni Turbine reported 1QFY27 revenue growth of 19% year on year to Rs 4.4 billion, broadly in line with Motilal Oswal's estimate of Rs 4.2 billion. Domestic revenue increased 27% to Rs 2.4 billion, while export revenue rose 11% to Rs 2 billion. Product revenue grew 19% to Rs 3 billion and aftermarket revenue increased 19.5% to Rs 1.4 billion.

Profitability was significantly below expectations. Gross margin declined to 42.6%, 190 basis points below the broker's 44.5% estimate. EBITDA margin fell to 11.6% from 19.8% in 1QFY26, compared with the 16.5% forecast. EBITDA declined 30% year on year to Rs 513 million against the Rs 697 million estimate, while PAT decreased 21% to Rs 511 million, 16% below estimate.

The margin pressure reflected an unfavourable revenue mix, deferred export shipments, higher other expenses and low-to-zero margin execution on the NTPC project.

Order Book and Domestic Demand

Order inflow increased 6% year on year to Rs 5.7 billion, taking the closing order book to Rs 21.8 billion. Domestic order booking, however, declined 35% year on year despite domestic revenue growth, signalling near-term demand softness.

Management said domestic inquiries have weakened across industries and customers are taking longer to finalise orders. Since product orders typically have a six-to-twelve-month gestation period, the current weakness in inquiries may affect bookings with a lag. Management nevertheless expects a gradual domestic recovery in the coming months.

Motilal Oswal forecasts domestic revenue and order-inflow CAGRs of 21% and 18%, respectively, over FY26-FY29.

Export Growth and Execution Outlook

Exports remain the central growth driver for Triveni Turbine. Export order booking rose 53% year on year and contributed 68% of total 1QFY27 order intake, compared with 47% a year earlier. Strong demand came from Southeast Asia, Africa and Europe, particularly in biomass, waste-to-energy and conventional applications.

Export orders accounted for 57% of the June 2026 order book. Some export dispatches were deferred by one to two quarters because freight rates increased three-to-four times and vessel availability tightened. This has shifted revenue recognition to 2QFY27 or 3QFY27.

The broker forecasts export revenue and order-inflow CAGRs of 15% and 22%, respectively, over FY26-FY29. It expects the mix to become more favourable from 2HFY27 as execution increases in export and aftermarket orders, supporting a recovery in margins.

New Opportunities and Product Development

US Data-Centre Opportunity

Management highlighted a developing US data-centre opportunity. Gas-turbine lead times of around four years are encouraging customers to consider conventional and combined-cycle solutions. Triveni Turbine is qualified with consultants, OEMs and EPC players and expects some inquiries to progress to commercial discussions and potentially orders during FY27.

Technology Initiatives and NTPC Project

The company is developing heat pumps, mechanical vapour recompression and Organic Rankine Cycle solutions. The Rs 1.75 billion pending NTPC CO2-based energy-storage order is expected to be commissioned in 2QFY27 or 3QFY27 and is mainly intended for technology validation. Execution of this order is expected to weigh on margins until completion.

Long-Term Estimates

Motilal Oswal forecasts revenue, EBITDA and PAT CAGRs of 18%, 18% and 19%, respectively, over FY26-FY29. The broker's investment view is based on a recovery in margins from 2HFY27, supported by higher-margin export and aftermarket execution, continued export order momentum and potential growth from emerging applications.

Key Risks

• A slowdown in capital expenditure could weaken demand.
• Stronger competition may affect growth and profitability.
• Technology disruption could reduce the attractiveness of existing solutions.
• An inability to innovate or launch products could limit future opportunities.
• Geopolitical headwinds could sharply weaken exports and aftermarket demand.