Triveni Turbine Limited (533655) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Triveni Turbine Q1 FY '27 Earnings Conference Call. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, sir.

Thank you, [Steve]. Good day, everyone, and a warm welcome to all of you participating in the Q1 FY '27 Earnings Conference Call of Triveni Turbine Limited. We have with us today on this call Mr. Nikhil Sawhney, Vice Chairman and Managing Director, Mr. S.N. Prasad, the Chief Executive Officer, Mr. Sachin Parab, Chief Operating Officer, Mr. Lalit Agarwal, Chief Financial Officer, Mr. Manikantan Rajendran, Chief Marketing Officer, and Ms. Shreya Sharma, Head of Investor Relations and Value Creation. I would like to now hand over to Shreya Sharma to share some opening remarks. Over to you, Shreya.

Thank you, Gavin. Good day, everyone, and thank you for joining us for the company's Q1 FY '27 earnings call. I hope you all have a chance to review the results and an accompanying presentation uploaded on the exchanges and on our website earlier. Our discussion on the call will follow that presentation. Before we begin, I would like to remind you all that some of the statements made today may be forward-looking in nature and are covered by the disclaimer of the earnings presentation. Joining me on the call today is the senior leadership team, who will take you through the key business developments and performance for this quarter. After the remarks, we will open the floor for the questions. With that, let me hand it over to our Vice Chairman and Managing Director, Mr. Nikhil Sawhney. Over to you, Mr. Sawhney.

Thank you very much, Shreya. Thank you, Gavin. A very good afternoon, ladies and gentlemen, and thank you for joining the Q1 FY '27 earnings call for Triveni Turbine Limited. As we had anticipated, the quarter remained challenging. Revenue from operations came in at INR 4.43 billion, up by 19.2% year-on-year. Domestic sales grew by 27.4% to INR 2.4 billion and exports grew by 10.8% to INR 2.03 billion, taking the export share in revenue to 48.8% against 49.3% in Q1 FY '26, a reflection of the stronger domestic contribution this quarter. Profitability, however, was softer in the quarter. EBITDA stood at INR 797 million at a margin of 18% against 25.8%, and a profit before tax of INR 697 million was down 20.1% at a margin of 15.7%, as opposed to 23.5% at the same quarter of the previous year. The execution in this quarter reflects the business environment and order intake of roughly a year ago. The softer order mix of H1 FY '26 has carried through to Q1 FY '27 profitability. Delivery phasing of certain strategic orders have also added to the softening of margins. With delivery spread across quarters and this quarter's revenue including the balance brought out scope of certain projects, a majority of this would be taken care of within the first half of this year. We remain optimistic on growth of both profit as well as revenue for the full year FY '27, which will of course be backended as suggested by the note. The balance sheet in this quarter has also improved, even though we are not reporting it. As a difference between Q4 FY '26 and Q1 FY '27 is a reduction in receivables and therefore a reversion to negative working capital and an increase in the cash balance of the company. On the order booking front, the order booking for the quarter stood at INR 5.68 billion as compared to INR 5.36 billion in Q1 FY '26, a growth of 6.1% year-over-year and an increase led entirely by exports and aftermarket. Export order booking grew 53.4% year-over-year, accounting for 68% of the total order booking as against 47% in Q1 FY '26. Reflecting continued traction and momentum. Can I ask someone to put it on mute because there's a reverb coming on the …

Yes, sir. Sure. You can proceed.

As I said, export order booking grew quite healthily and accounts for 68% of the total order booking as opposed to 47% in Q1. This reflects our continued traction and momentum across Southeast Asia, Africa, and Europe, and across segments such as biomass, waste-to-energy, in addition to the conventional segments. The share of aftermarket order booking increased to 39% of total order booking compared to 27% in Q1 FY '26, a growth of 54%. Domestic and product order booking witnessed a slowdown during the quarter, lower by 35.4% and 11.6% respectively on a year-on-year basis. The higher share of exports and aftermarket orders reflects the continued strengthening of our business mix. It is improving the quality of our order book and shifting the portfolio towards better margin offerings, which should support the profitability as we execute those orders. The overall order book also witnessed an improvement. Our international expansion strategy, coupled with continued innovation and entry into new product segments, has yielded encouraging results. The closing order book stood at INR 21.8 billion as of June 30 as compared to INR 20.74 billion a year ago, reflecting a 5.1% year-on-year increase. Export order booking accounted for 57% of the closing order book. The aftermarket business also continued to gain strong momentum, with closing orders increasing 115% year-over-year to INR 6.24 billion on the back of contract wins in the geothermal and utility segments, and continued traction in the refurbishment and performance optimization solutions, which contributed 29% to the closing order book. This performance underscores the company's agility in operating across geographies and sectors, positioning us well to capitalize on emerging opportunities across geothermal process industries, utility scale refurbishment, and renewable thermal solutions. The growing global emphasis on energy efficiency and decarbonization, coupled with renewable energy adoption and decentralized power generation, continues to generate and create strong and sustained demand for our products. Having said that, as we look forward, the inquiry generation in the international market has improved while the domestic market has seen weakness. As you know, we report our inquiries on a fixed monthly basis, and we will continue to do that next quarter. While we can internally see weakness, we are optimistic that the domestic market will show some signs of recovery in the coming months as well. During the quarter, our U.S. subsidiary continued to receive healthy inquiries as well, and that's a market which continues to grow in both inquiry book as well as our optimism towards future demand for both products and aftermarket services from a very large market. Our focus there remains on strengthening the local service and product capabilities and deepening our market presence and building a strong term footprint in the Americas. As highlighted in our previous earnings calls, we continue to invest heavily into research and development and we continue to develop newer product ranges in newer lines, which can help expand our offering to our customers to ensure that we can utilize any heat or waste heat requirements that they may have to generate an effective return by either providing it for process requirements or towards generation of power. This includes the development of our organic Rankine cycle developments, and we are keen to expand this in the coming year. Going forward, we are well positioned to sustain growth and this is coupled with our digital offerings. As of this current quarter, we have actually transitioned the role and position of our COO to that of business transformation to look at AI specific initiatives. This is a further reinforcement of what we believe the company needs to focus on in the future, which is to be extremely agile and focused on productivity while still ensuring that we are able to cater to customer delight and ensuring our product relevance to our customer base. Therefore, while this current quarter has exhibited the situation of how geopolitical uncertainties can bring volatility in both dispatch and order booking, I am sure that you will have more questions on why our margins have been what they are and where recovery would be. I would rather take that in the question and answers than answer it right now. But suffice to say that the company is optimistic on the growth, both in margins and absolute and on a percentage basis in the second half of this year. As we look at the full year FY '27, we are confident to exhibit top line and bottom line growth. With that, ladies and gentlemen, I am happy to take questions and answers.

Thank you, sir. We will now begin the question and answer session. [Operator Instructions]. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Amit Anwani with PL Capital. Please go ahead.

Hi. Thank you. Thanks for the opportunity. My first question is, what was the impact of the NTPC order? I assume probably there was execution coming in in Q1 also. Was there an impact there? What was the quantum? That is my first question. Second, in terms of, you have written about the, I think cost push also. What are the kind of contribution of impacts from the commodity inflation also in this quarter?

Okay. So your question is around margins, essentially, and how we have exhibited margins this current quarter. It is not a question of making excuses, but the fact is that they are execution of certain orders, especially on the export side, have gotten deferred by clients because freight rates have gone up between 3 to 4 times, and those have gotten pushed from Q1 to Q2 to maybe Q3 even. What ends up happening is that when you have a higher percentage of domestic execution as part of the revenue mix, that is of course depressing on margins to begin with. Secondly, you have, as you rightly pointed out, a strategic order that we have taken on the NTPC carbon dioxide-based energy storage project, which was essentially meant to validate technology and to prove a use case for our equipment. This of course, was taken at negligible and near zero margins. That does not contribute to profitability at all. I will ask Prasad to comment a little bit about the quantum of the NTPC project. You will have to know that the NTPC project is due for commissioning in Q2, so we will have certain revenue in Q2 as well. Prasad, can you give a little bit of idea about the NTPC project and domestic and other situation on margins?

Yes. I will particularly agree, sir, before getting into the margin on the NTPC project, as our VCMD rightly mentioned that this is one of the technology validation project, because this is the first of its kind when it comes to the energy storage through CO2. Yes, we have taken this project knowingly, so this may not be contributing to the bottom line in the initial years. Once the technology is proven, this is going to bring a lot of value add. The positive thing is that this technology where the pilot plant is running in Europe, that started giving a very positive results. Even site execution going at a faster pace. Probably by end of Q2, early Q3, it will come to a commissioning phase of this thing. Basically, since we forecasted these margins, the real margins sort of a thing from this. The major contribution is the share of non-domestic orders in the revenue mix is increased. That is the main pull down on the margin sort of a scenario. In addition to whatever international orders, couple of orders where because of the freight and today vessels not availability, those things affected, some of those planned export orders shifting to Q2, Q3. Otherwise, overall, we are quite confident. Overall, here there will be a positive traction in terms of revenue growth as well as the profitability growth.

Right. Second question on the inquiry book. Last time you highlighted, I think roughly about 18 gigawatts for the global inquiries and domestic inquiry was about 7 gigawatts. How that has grown and what is the primary reason for the domestic slowdown? Any particular industry or are you seeing delays from the customers in terms of conversions of orders? If you could dig down more on the domestic side, that will help.

I hesitate to give you exact numbers on inquiries on a quarterly basis because the market does not move that quickly, so it is better to take it over a period of time. We will be sharing the numbers exactly on the 6 month and full year basis. Having said that, we see the international -- this continued strength in certain markets in the international market in terms of revenue -- inquiry growth, which includes the United States and Southeast Asia. There are some green shoots in Europe as well. The markets in North Africa, Middle East are quite depressed. The SAARC regions remains depressed. The Indian market has seen a decline, and that is broad based across all industries. But it is not a reflection of the conversations that we are having. An inquiry is a potential demand. When we are having conversations with customers, it seems to suggest that the market is sort of flat. Even though the direct inquiries, which are part of our inquiry book, have come down in the domestic market.

Sure. Lastly, you spoke about the top line and bottom line growth. Is there an expectation you are building that probably will be able to cross the double digits or it will be less than a double digit this year?

We do not give visibility to that extent. But the fact is that you have seen we are a company that has to execute our order book. So the growth of our order book reflects what we have to actually execute. As we get into larger size orders, those have longer duration execution cycles. But suffice to say that we are quite confident of growth in this year. The team is all geared to execute on it. We of course still need certain book and build of spares to come in, which has a shorter duration execution cycle. So some of that will depend in the coming months in terms of the order booking. But again, we are optimistic based on our current order booking and order book size on the growth anyway. The extent of growth I think should be on the higher end of what you are suggesting.

Understood. Thanks, Nikhil. Thank you so much for answering my questions.

Thank you. The next question comes from the line of Ravi Swaminathan with Avendus. Please go ahead.

Hi, sir. Thanks for taking my question. My questions are also in similar lines to the previous person. With respect to the NTPC CO2 storage, how much of revenue contribution would have happened during 1Q? And given the fact that this is going to get commissioned in 2Q, how much amount of execution is likely to happen during that quarter? So if you can share that will be my first question.

We don't give a real breakup of revenue from order to order. But I think we had alluded at the end of Q4 that we still had about INR 175 odd crore of the order to get executed. It could be split, I would say maybe 40% odd in Q1, Q2, and then the rest in Q3…please continue Ravi.

Yeah. This INR 170 crore will be largely the bottom line [indiscernible]. Is that understanding right? I'm just trying to assess whether similar impact would be seen in 2Q also [indiscernible].

Cost escalations have already been forecast to whatever extent that there has been. I think the previous caller also did allude to the fact that to what extent did cost escalations lead towards margin decline. But it wasn't to such a large extent. The fact is, the orders were taken at a point in time when there was volatility in commodity pricing. The commodity pricing was taken at that point in time itself, and those margins, especially on the domestic orders, were already low at the point in time that we took them. So they've been executed in line with our expected margins. So none of this is coming as a surprise to us. This is pretty much the way it was meant to be. The only thing that has come as a little bit of surprise is in our export orders, as freight rates have gone up three, four times, the availability of vessels has become a little bit less easily available for our customers, as well as possibly certain site activities may not have kept pace. But customers have pushed out some of their dispatches that they need from us. This largely happens on the export side only because the domestic market doesn't suffer from those same problems. That has just led to a delay in recognizing revenue and billing that. So I feel that all of this will come back on track in a period of time because what this geopolitical uncertainty has done is it's made everything a lot more volatile. Where we thought that we would be lumpy on a half yearly basis, now it's come down to quarterly basis and monthly basis. I guess for us to smoothen it out, we need to have a much larger order booking so that we can display that. But I think that this lumpiness will continue for a couple more quarters, both on the positive and negative side. So you may have a negative quarter like this, but then you'll have positive quarters as well. So we shouldn't read too much into those positive quarters also.

Understood. With respect to the inquiry pipeline and/or rather with respect to the domestic market, you had mentioned that commentary or ordering weakness has been there during this quarter. Is it just that the ordering finalization is getting deferred a bit, or is it that the inquiry levels themselves have dipped a bit? Because in the previous couple of quarters, your commentary on the domestic market was relatively on the stronger side. So is it just that the order finalization is getting delayed and if so, why is it getting delayed? Is it because of the war and all these things that the domestic market customers are delaying order finalization?

I think the previous caller also had the same question. Let me answer. The inquiry book is a status of vague or general demand in the market. The order finalizations themselves would translate into market share and then order booking. The decline in the inquiry book in the domestic market means that certain demand has just left the market. Again, like I'm saying, if you start tracking this on a quarter-to-quarter basis, when we've done it internally, it gives us a wrong impression in terms of the priorities. I don't think it's a matter of concern if the market declines just 2%, 3%, 4%, 5%, because the entire inquiry book as we reported at the end of last quarter is so large that it is several times annual demand in the domestic market anyway.

Understood sir…

Let me ask Prasad to comment a little bit about this as well, and maybe you could bring in Mani, Prasad.

Yes, sir. Yeah. In a domestic market, yes, the inquiry pipeline suddenly in previous quarter, we have seen a little slowdown on that. Even order finalizations we experienced little longer gestation periods, means customers not concluding the orders immediately like earlier quarters. Even in a domestic customer, just waiting and watching. But by considering whatever opportunities which are open for finalization, we feel that it should bounce back. Mani, you want to add any specific points, please?

Yeah. Now, in our kind of a business for the product, the gestation period is anywhere between 6 to 12 months. The orders which get finalized in this quarter are the ones for which the inquiries were received six months or 12 months earlier. The trend what we are now talking is with respect to the inquiries which we have received in this quarter, there has been a softening, but this would be the order gets finalized much later. So what is more important is for the current few quarters is what the inquiries we have in hand and the inquiries which we are receiving is going to be getting finalized few quarters later. On the inquiry finalization, we do see the numbers are well compared to last year, though the inquiry generation for this quarter in the domestic market there is a dip. This is how I would conclude.

My final question is with respect to the progress in growth in API turbine, and also in the U.S. market, the status of providing after-sales service to customers and also possibly supply of products to customers.

Mani, why don't you take that as well?

Yeah. In terms of API business, we see a lot of traction with the number of thermal power plants coming in India. We see lot many things happening and also with the oil and gas especially. While there are opportunities which we are seeing because of the ongoing geopolitical tensions, the decision-making is getting deferred. Though there is a potential, and it's only a matter of finalization which is getting delayed, I would say. We are also now looking at oil and gas opportunities not beyond the Middle East market, in Americas as well as in European countries. In this particular quarter, we have secured API business orders from Europe as well. This is on the API business. Now, with respect to the U.S. market, we see lots more traction. Now, there is a huge scope for data centers, and the last few years, they have been predominantly being powered by the gas turbines. Now, with the ongoing demand for gas turbines, the delivery is anywhere between 3 to 4 years to 5 years. We see the companies going towards the other modes, like conventional route, combined cycle. Then we are also seeing small modular reactors. There is a lot amount of traction. We see number of inquiries from the American market, and it's only a matter of time these get converted. Yeah.

Thanks a lot. I'll come back in the queue if I get more questions.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question comes from the line of Mohit Surana with Monarch Networth Capital, please go ahead.

Thank you for the opportunity. My first question is with respect to the bought-out components. Out of the total COGS, can you give us an indication of how much would be the bought-out component, and was there any price inflation in that which we were not able to pass through?

We have a fixed price contract, so it is not a question of passing through price escalation. Unless the customer delays orders, usually these price escalations have to be absorbed at the point in time -- in the contract itself. Usually, we work on rate contracts, but I will ask Prasad, maybe you could comment on the quantum. Or Lalit, if you are there, you could comment. Prasad, maybe you can start first, and then you could bring Lalit in if necessary about the quantum of BOP. I would suggest you should be a little vague rather than give an exact number, please.

Yeah. Two ways I will address this thing. One is, as Nikhil mentioned that these are all fixed contracts because as far as the customer is concerned, it is a fixed locked price. During the execution, if any commodity price increases there, that is a risk what we carry along with us. Suppose if the volatility is too much, then sometimes that hits. In the beginning when we are picking up the orders, we also monitor this very carefully. In majority of the cases, that is a de-risked appropriately costing some contingency sort of a thing. Then order to order, bought-out item percentages changes. The scope customer to customer changes. There is no standard scope between two contracts. The variation is to a large extent, sometimes the bought-out percentages may be something like 30%-40%, sometimes maybe 60%-70%. We cannot generalize that. Again, that also quarter on quarter, the way how deliveries takes place based on the readiness, that mix also changes. Lalit, you want to add some points on that?

Yeah. There is no fixed percentage with respect to the balance of plant which is being procured. It varies from order to order between 30%-70%. Yeah. This is what we would like to mention.

Understood, sir. My next question is with respect to the R&D initiatives that we have been taking in the past with respect to the new products, heat pumps, mechanical vapor recompression. Any traction on that you can share with us right now?

Yes. Prasad, can you please comment on.

Yeah.

Both of these are areas which really do allow our capabilities as a company to be brought to the front. Some areas like heat pumps, when we combine them with steam generation, end up adding greater industrial applications. You have to look at them in sequence of development. But Prasad, maybe you could give an overall impression on these two current product lines as well as future product lines that we may be developing.

Yes, sir. Heat pumps, basically as a company, we are not seeing a heat pump as a standalone product. We are looking overall solution. Basically, combining heat pump along with MVRs. This gives a total solution to customers, basically customers where there is a low pressure, low quantity steam requirement. This combination can replace a small packaged boiler sort of a business opportunity there. As some of you are aware, we created a demo unit for heat pump and some of the MVR orders which are under execution, the initial orders. We are confident this combination going to – okay it is taking time, and it will take time because this is a new technology, and some of the customers want the experience of this combination giving the desired results in terms of efficiency, in terms of return on investment, and all those things. This is the initial phase of pushing the solution into that. It is taking time. Otherwise, yes these things are going as per plan, and we are confident this is going to bring a good value addition in the near future into this thing. In the similar way, we continue to invest into new technologies and new solutions. When it comes to new technology and new solutions like ORC, we are in touch with customers. Inquiry pipeline is increasing for this thing and that also as ORC solution, the customers looking for the power generation from low heat. Today this is unaddressed market or largely under-addressed market by majority of the players around. That inquiry pipeline is increasing and this market is across the globe sort of a thing, including Americas. The other area where we are working very closely, combining the ORC with a geothermal combination sort of a thing. Basically, as our technology innovation, what we are focusing is rather than a product as an overall solution, combining two products and finding a better efficient solution, cost-effective solution. That is really on track and it is going to give a positive result in near future.

Understood…

I think what [indiscernible] is a very important part. We are a single product company, and as we add multiple products to our offering to one customer, that becomes more of a solution orientation. We will do it incrementally without taking on EPC responsibilities and the liabilities that come along with that. The point is to offer a better technical solution to our customers and ultimately give them a better payback for whatever they desire.

Understood, sir. Just one last question, if you may allow. With respect to the consolidated EBITDA margin, we were somewhere around 20%-22%. That has fallen significantly this quarter. As you explained, these are because of some specific reasons. But for H2, what kind of sustainable EBITDA margins, I mean, going forward, we can expect? Because now you have the visibility of the orders that you have taken, and based on that you would also have the visibility of margins that you would make. If you can just also highlight that.

I'm not going to be very specific on giving you a number, but I'll take you back to what we've always said as a company to our investors and on these calls, is that as a company, we believe that a PBT margin of over 20% is something that we can maintain in the medium and long term. Therefore, that is something that we will definitely reinforce.

Understood, sir. Thank you so much.

Thank you. The next question comes from the line of Chirag Muchhala with Centrum Broking. Please go ahead.

Yeah. Thank you, sir. First question is on the global data center opportunity that we had highlighted in the last quarter. In Q1, either for us or for other global steam turbine makers, has this opportunity started getting converted to actual order placement, or is this still in advanced evaluation phase?

Mani, can I ask you to please answer this question?

Yeah. In terms of global data centers, as I mentioned earlier, I was personally there in U.S. last couple of weeks now. We have visited several customers. There is a huge demand. There is no question about it. There is a huge demand for data centers. So far, as I mentioned earlier, they were using gas turbine to speed up the process so that the power can be generated as quickly as possible. With the lead time for gas turbines going to 4 years, people are looking at other avenues to power the data centers. We have had multiple inquiries. There is a growth in the inquiry with [book] from U.S. Same thing we also see in other parts where data centers are involved. It's a matter of they switching from the gas turbine to a conventional cycle or a combined cycle. We are hoping it could translate in this year. We are hopeful.

Okay. Sir, second thing on the aftermarket service division. So, in Q4 as well as in Q1, we have seen material rise in the order inflow. If you can highlight if any specific areas like retrofitting or utility power turbine orders, et cetera, for this aftermarket solutions is part of this last six months. Is this a INR 150 crore, INR 170 crore, and kind of INR 250 crore? I am not trying to get an exact number, but can aftermarket in even quarterly inflow be materially higher than what we were doing so far?

The attempt is to have multiple avenues of growth for the business. The aftermarket business is reliant on two streams. One is our own installed base and the growth of spares and service to that. The second is refurbishment, which actually has a much larger market too, based on the larger installed base of rotating equipment. You have seen a very strong growth on the refurbishment side and exports. As we have invested in local capabilities, those take time to build up, and those are in certain areas such as gas turbine utility businesses, which provide long-term and high margin, a good margin visibility for this company, not only for this current year, but for coming years. Do you want to add on the outlook on this, Mani, for refurbishment?

Yes. On the aftermarket, as Mr. Nikhil said, we have had a good translation of orders across the sectors, whether it be across the region as well, be it in Southeast Asia or in Africa. There has been a good jump in African market, and we also see some traction in India on the refurb side. But on the sector-wise, we have seen on the gas turbine as well as in the geothermal, biomass, the old utility turbines. We are now getting into the utility segment, moving to a higher value addition in the utility segment from the industrial segment. Those are the ones which are coming in. That is why you are seeing the values going up.

Okay, sir. Lastly, you mentioned that some of the export orders have been deferred by 1 to 2 quarters due to logistics cost and freight rates rising significantly. Sir, just wanted one clarification here. Are these freight rates and logistic costs, does it come under our purview or is it something that the clients bear?

No, that's on the clients. That's why it's their flexibility.

Okay. So all export orders of ours, the logistics and freight rates are borne by clients?

It's FOB.

Okay, sir. Okay thanks.