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INITIATING COVERAGE SEPTEMBER 21,2016 PRIVATE CLIENT RESEARCH Suyash Jain [email protected] +91 7045735137 Industry CMP Recommendation 1 year Target Capital Goods 123 BUY 146 We recommend a BUY on Triveni Turbine with a target of INR 146 - valuing the company on DCF basis. Triveni Turbine Limited (TTL) is a leading steam turbines manufacturer from India with a global footprint spanning over 50 countries. TTl has been helping customers in achieving power self-sufficiency and sustainability with its customised steam turbines up to 100 MW range. The Company is the market leader in India with a dominant market share. It also offers comprehensive aftermarket services covering the entire lifecycle of turbines. TTl operates in higher capacity range of above 30 MW to 100 MW turbines through its subsidiary, GE Triveni ltd., a joint venture company with General Electric. Key investment Arguments 1. Market Leader and Global Market Presence Although Triveni has maintained its leadership with a 60% market share over the years; the domestic 0-30MW turbine market has been consolidating at 700MW over the last three consecutive years. Industrial steam turbines are technology-intensive products, with two dominant players in the domestic market (Triveni and Siemens) and ~10 in the international market. Customised configuration and a smaller scale restrict competition from the utility size turbine manufacturers. 2.Aftermarket to drive profitability Owing to the functional criticality of the aftermarket requirements and limited competition, Triveni is able to command margins as high as 40% and at the same time offer value to its clients which is unmatched by any other company. Over the past few years, Triveni has started addressing aftermarket requirements for turbines up to 300MW irrespective of the manufacturer. This has resulted in a multifold expansion of the addressable market for Triveni. With increasing focus on servicing and refurbishment, the share of aftermarket in total sales has improved from 18% in FY12 to 27% in FY15.

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INITIATING COVERAGE SEPTEMBER 21,2016

PRIVATE CLIENT RESEARCH

Suyash Jain

[email protected]

+91 7045735137

Industry CMP Recommendation 1 year Target

Capital Goods 123 BUY 146

We recommend a BUY on Triveni Turbine with a target of INR

146 - valuing the company on DCF basis.

Triveni Turbine Limited (TTL) is a leading steam turbines manufacturer from India with a global footprint spanning over 50 countries. TTl has been helping customers in achieving

power self-sufficiency and sustainability with its customised steam turbines up to 100 MW range. The Company is the market leader in India with a dominant market share. It

also offers comprehensive aftermarket services covering the entire lifecycle of turbines. TTl operates in higher capacity range of above 30 MW to 100 MW turbines through its

subsidiary, GE Triveni ltd., a joint venture company with General Electric.

Key investment Arguments

1. Market Leader and Global Market Presence

Although Triveni has maintained its leadership with a 60% market share over the years;

the domestic 0-30MW turbine market has been consolidating at 700MW over the last three consecutive years. Industrial steam turbines are technology-intensive products,

with two dominant players in the domestic market (Triveni and Siemens) and ~10 in the international market. Customised configuration and a smaller scale restrict competition

from the utility size turbine manufacturers.

2.Aftermarket to drive profitability

Owing to the functional criticality of the aftermarket requirements and limited competition, Triveni is able to command margins as high as 40% and at the same time offer value to its clients which is unmatched by any other company. Over the past few

years, Triveni has started addressing aftermarket requirements for turbines up to 300MW irrespective of the manufacturer. This has resulted in a multifold expansion of

the addressable market for Triveni. With increasing focus on servicing and refurbishment, the share of aftermarket in total sales has improved from 18% in FY12 to

27% in FY15.

mailto:[email protected]

INITIATING COVERAGE SEPTEMBER 21,2016

PRIVATE CLIENT RESEARCH

2.International Presence

Formed in 2010, with both partners having an equal stake, the JV intends to tap the global turbine market in the range of 30-100MW. The JV enjoys synergies such as

(I)Triveni gaining an immediate entry in the 30-100MW market without any gestation period Or risk in terms of product development with the help of GE's technology (ii) Low cost manufacturing capabilities of Triveni (iii) Global sales network of GE along with its

recognized brand name and domestic sales network of Triveni. The JV is likely to propel the company into a higher orbit and is expected to exceed the standalone company's

export revenues in the long run as the global addressable opportunity for 30-100MW turbines is much larger than 0-30MW turbines.

4.Strong FCF Generation

• Positive free cash flow on account of strong capital efficiency.

• FY14 Invested in Industrial Land

• Further in 2017 and 2018,the CAPEX is going to increase for equipment and machinery.

990

696

-133

274

598

340 300

-200