Thermax Ltd. share price target

Thermax Ltd (TMX) is a leading energy and environment solutions provider. They offer integrated innovative solutions in the areas of heating, cooling, power, water & waste management, air pollution control and chemicals ....

Q3FY18 order inflow at ~Rs 14 bn increased 19% YoY on a large order win of Rs 3.3 bn from a chemical company for 130 MW captive power plant. Order backlog swelled 27% YoY to Rs 55.6 bn ensuring good growth visibility for FY19.

Thermax (TMX) operational performance was below our expectations. While revenues increased by 18% yoy aided by strong order backlog, the EBITDAM declined by 72bps to 8.5% impacted by higher than expected rise in steel prices. APAT was up by 9%. While the order inflows increased by 19% yoy to Rs14bn (up by 45% for 9MFY18), the order backlog grew by 27% to Rs56 bn providing decent revenue visibility for FY19E and FY20E. However, the increasing steel prices could limit profit growth as most of the fixed price international orders were booked ~2-3 quarters ago. Thermax Babcock & Wilcox (TBW) JV has ceased operations and is in the process of...

With stronger backlog, revenues were a beat. Margin, however, is a cause of concern. The reasons are multi-fold: (1) higher input pricesspecifically steel; and (2) losses in Danstoker and Chinese subsidiary; and (3) legacy projects/initial expenses for international subsidiaries....

Maintain a NEUTRAL on TMX, with TP of Rs 1083/sh (32x Dec-19 earnings vs 30x earlier, citing a solid 45% growth in order flows in 9M and increased revenue visibility). TMXs 3Q consol. sales rose 15% YoY/8% QoQ to Rs 11.2bn supported by an 18% YoY rise in energy revenues to Rs 8.7bn. Environment/Chemical revenues rose 3/7% YoY to Rs 1.7bn/Rs 906mn. (Beat on our estimate of consol. revenues of Rs 10.3bn). EBITDAM fell 44bps YoY to 8.5% (vs our estimate of 9.7%), a result of a 725bps YoY rise in material costs to 52.6%. Environment/ Chemicals EBITM contracted 521/292bps to 2.8/14.4%. Energy EBITM rose 100bps to 8.3%. Net profit was up 7% YoY to Rs 586mn.

3 QFY18 operating performance at the consolidated level was below expectations. Sales grew 18% YoY to INR11.2b (est. ofINR12.1b), impacted by a weak performance in the environment (+3% YoY,INR1.7b) and chemicals (7% YoY, INR0.9b) segments. Gross margin shrunk590bp YoY to 47.4% due to adverse raw material price movement and execution of lower-margin orders. Despite a 590bp contraction in the gross margin, the operating margin shrunk by only 80bp YoY to 8.5% (est. of 9.0%)due to lower other expenses (-320bp YoY to 23.5 %). EBIDTA grew 9% YoY toINR0.96b. Adj. net profit rose 9% YoY to INR0.6b (est. of INR0.78b)

Q2FY18 order inflow at ~Rs 14 bn (up 13% YoY) was above our/street expectations on strong order inflow from domestic up 20% YoY as well as international (up 8% YoY) markets.

Thermax Ltd Q2FY18 results comment Revenue grew by 18.5% to Rs. 1033.1 Cr in Q2FY18 when compared to the previous quarter. On the other hand, it fell by 3.47% when compared with Q2FY17.

Order inflows were higher than expectations. At Rs13bn, up 14% YoY, they were led by textiles, chemicals, food and refinery. In domestic markets, they have improved 20% annually. With ASEAN operations on, the orders could be higher in the future. Revenues were marred by GST implementation. Margins in chemical segment were healthy because of product mix; resins 55%; while specialty occupying remaining...

Order Booking Sustained; Revenue & Profits Down in H1FY18: Order inflows were steady from both international and domestic markets, from sectors like Cement, Refinery, Textiles and Food & Beverages. Consolidated order booking for the quarter reached Rs.13,970mn which is higher by 13.6% on YoY basis breaking into domestic flows of Rs.6920mn and export flows of Rs.7050mn during Q2FY18.