Triveni Turbine faces margin pressure as H2 FY27 recovery depends on exports

Investment View and Rating

PL Research maintains a HOLD rating on Triveni Turbine, with a target price of Rs 615, reduced from Rs 638. The target is based on 38 times March 2028E EPS, with the valuation multiple unchanged. The broker expects the FY27 recovery to be back-ended towards H2 FY27, supported by improving export execution and order mix.

The near-term outlook remains challenging because of weak profitability, slower domestic order finalisation and geopolitical uncertainty. However, PL Research retains a constructive long-term view, supported by the enquiry pipeline, a growing higher-margin export and aftermarket mix, traction in industrial and API drive turbines, and a robust order book.

Q1 FY27 Financial Performance

Triveni Turbine reported consolidated Q1 FY27 revenue of Rs 4.4bn, up 19.2 per cent year on year and 2.0 per cent above PL Research's estimate of Rs 4.3bn. Domestic revenue rose 27.4 per cent to Rs 2.4bn, while export revenue increased 10.9 per cent to Rs 2.0bn. Product revenue grew 19.1 per cent to Rs 3.0bn and aftermarket revenue increased 19.5 per cent to Rs 1.4bn.

The margin shortfall reflected an unfavourable order mix, higher domestic execution, price escalation and deferred export dispatches amid freight rates rising three to four times. The ongoing NTPC strategic order also continued to weigh on profitability.

Order Inflow and Order Book

Q1 FY27 order inflow rose 6.1 per cent year on year to Rs 5.7bn. Export orders increased 53.4 per cent to Rs 3.8bn and aftermarket orders increased 53.4 per cent to Rs 2.2bn, supported by geothermal and utility contracts, refurbishment, and performance-optimisation solutions.

Domestic orders declined 35.4 per cent to Rs 1.8bn, while product orders declined 11.5 per cent to Rs 3.4bn. The order book stood at Rs 21.8bn, up 5.1 per cent year on year.

International enquiries improved in the US and Southeast Asia, while North Africa, the Middle East and India remained weak. US enquiry conversion exceeds 12 months, limiting its near-term contribution.

Execution Outlook and Management Commentary

Management indicated that execution headwinds should ease during H1 FY27, with revenue expected to be weighted towards H2 FY27 as export dispatches and the order mix improve.

The near-zero-margin NTPC carbon dioxide storage project, undertaken for technology validation, has about Rs 1.75bn pending execution. It is targeted for commissioning by the end of Q2 or Q3 FY27 and will continue to weigh on margins. Management's medium- to long-term PBT margin target is above 20 per cent.

The US business remains loss-making because of an insufficient order book and is expected to break even only during FY27. Its growth plan initially centres on refurbishing the US installed base, although state-level certifications constrain expansion.

Earnings Forecasts and Valuation

PL Research cut FY27E and FY28E EPS by 12.1 per cent and 3.6 per cent, respectively, to Rs 12.3 and Rs 16.2. The revisions primarily reflect lower margins, delayed exports and a slower domestic recovery.

The target price was reduced to Rs 615 from Rs 638, based on 38 times March 2028E EPS. The valuation multiple remains unchanged.

Key Downside Risks

• Sustained adverse order mix and continued low-margin execution.
• Freight and commodity-cost pressure on fixed-price orders.
• Customer delivery deferrals and delayed export conversion.
• Weak domestic demand and slower domestic recovery.
• The low-margin NTPC project continuing to weigh on profitability.
• Geopolitical disruption affecting execution and demand.