Shares of Triveni Engineering and Industries Ltd rose 2% in early trade today after posting strong fourth-quarter results. Shares of Triveni Engineering were trading 1.82% higher at Rs 279.50 at 10:17 am on the NSE.

In a post-listing regulatory filing dated May 25, 2023, the company said it had made a net profit of Rs 109.17 crore for the same period last year. Operating income rose 52.51% to Rs 1,818.29 crore from Rs 1,192.12 crore in the year-previous period. The board has recommended a dividend of Rs 3.25 per share on the paid-up share capital of Re 1 for the financial year ending 2022-23, subject to shareholder approval, the company said.

ICICI Direct rates Triveni Engineering a “buy” with a target price of Rs 370. This positive recommendation is based on Triveni Engineering’s strong financial performance in Q4FY23. The company reported strong results, largely due to higher cane crushing, increased ethanol capacity and a greater focus on producing B-heavy ethanol. These factors help Triveni improve its profitability and growth prospects.

According to ICICI Direct, one of the key drivers of Triveni Engineering’s success has been its expanding distillery capacity. The company plans to increase its production capacity from the current 22 crore litres per year to about 32 crore litres per year by January 2024. This strategic move will allow Triveni to capitalise on the growing demand for this renewable fuel source and use more sugarcane for ethanol production in the future.

ICICI Direct reported that while Triveni experienced lower sugar recovery in the current 2022-23 season, the company’s cane crushing increased by around 11%. Increased production volumes helped to partially offset higher production costs, which in turn contributed to improved operational efficiency. In addition, the upward trend in domestic sugar prices is expected to boost Triveni Engineering’s future profitability.

ICICI Direct is optimistic about Triveni Engineering from a long-term growth perspective. To reach the target price of Rs 370 per share, the brokerage has applied a sum of parts (SOTP) valuation method. Under this methodology, Triveni’s engineering business is valued at 14 times FY25 estimated EV/EBITDA. Also, the sugar business is valued at 12x FY25E estimated price-to-earnings (PE).