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Triveni Engineering expects sugar price rise to aid margin expansion

earnings | Jan 25, 2023 1:54 PM IST

Triveni Engineering expects sugar price rise to aid margin expansion

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Triveni Engineering & Industries will be expanding their distillery capacity. Two new distilleries, each with a capacity of 225 klpd, are set to be completed in quarter four of FY24. Once these distilleries are operational, the company's distillery volumes will be north of 32 crore litres.

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Triveni Engineering saw strong revenue growth in the third quarter, although the margin remained under pressure. The company has proposed a Rs 190 crore capacity expansion plan across verticals. According to Tarun Sawhney, Vice Chairman and Managing Director of Triveni Engineering & Industries, sugar prices are expected to rise in quarter four, which will aid in margin expansion across all segments of the company.
“We have reported fairly healthy quarter three numbers with margin expansion across all the verticals of the business. The only vertical, which was slightly subdued was sugar. We expect that will rebound in quarter four when we have more of the export revenues coming back in,” he said.
“The hope is that we will see some improvement in sugar prices which have remained subdued. My expectation is that as the course of the season continues, we will see sugar prices rise slightly and we will hopefully be able to see the kind of margins overall for the company that we saw last year,” he added.
He also discussed the company's plans for the upcoming quarter.
In terms of capital expenditures, Sawhney stated that the company will be investing around Rs 90 crore in the sugar segment, mostly for cost optimization. However, he also noted that this capex will have a greater impact on the bottom line rather than the top line.
In addition to the cost optimization efforts, Triveni Engineering & Industries will also be expanding their distillery capacity. Two new distilleries, each with a capacity of 225 klpd, are set to be completed in quarter four of FY24. Once these distilleries are operational, the company's distillery volumes will be north of 32 crore litres.
Sawhney also highlighted that the engineering revenue is expected to increase to 15 percent from 10 percent at full capacity. Additionally, the revenue mix from the sugar distillery segment will change from 80:20 to 70:30.
The company plans to fund the capex through internal accruals, and Sawhney added that the average cost of debt is under 5 percent.
The stock is currently trading at Rs 272.25. It was down 3.87 percent in the last one week and up 0.04 percent in the past month.
For the full interview, watch the accompanying video
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