March 4, 2023
analysis123 analysis123
THERMAX, Margins to stabilise…
Call & Research Report by ICICI Securities
Sector: Engineering – Industrial Equipments
CMP Rs. 2143, Target Rs. 2375 (11% upside potential)
Target Period: 12 Months
Thermax Ltd (Thermax) offers integrated solutions in the areas of energy and environment – heating, cooling, power, water & waste management, air pollution control and chemicals.
● It operates in three key segments energy (~70.7% of FY22 revenue), environment segment (~20.6%) and chemicals segment (~8.7%)
● Focus to increase product & services share (~50% in FY22) vs. projects
Q3FY23 Results: Thermax reported decent Q3FY23 results.
● Consolidated revenue at Rs 2049.3 crore, up 27% YoY, on better execution
● EBITDA came in at Rs 161.1 crore, up 42.4% YoY, with improved margins of 7.9% thanks to lower commodity inflation
● Adjusted PAT came in at Rs 126.4 crore, up 59.1% YoY
● Order inflows for Q3FY23 were at Rs 2204 crore, de-grew 10% YoY. The order inflow last year was higher due to an order worth Rs 830 crore for FGD
What should investors do? Strong balance sheet, prudent working capital management, recent technological tie-ups, are expected to support growth
● We remain long term positive on the stock maintain our HOLD rating
Target Price and Valuation: We value Thermax at Rs 2375 i.e. 40x on FY25E EPS.
Key triggers for future price performance:
● We expect revenue, EBITDA to grow at CAGR of ~17.4%, 25.1%, respectively, in FY22-25E amid margins gradually returning to normal levels
● Recent broad based recovery in order inflows, strong order enquiry pipeline across industrial sectors likely to ensure decent order inflows, going forward
● Controlled net working capital (NWC), strong balance sheet
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