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 . Order book grew by 47% YoY to Rs5,302cr (1.4x TTM revenue) supported by 44% rise in order inflow. Q4FY18 sales & PAT declined by 2.4% & 5% YoY (below estimate), due to slower execution in environment & chemical business...

Thermax (TMX) revenue was down by 3% in Q4FY18 mainly on account of issuesrelated to e-way bill which was quantified at around Rs. 2 bn by the management. However, this is normalising in Q1FY19. Operating margins were lower by 200 bps for the quarter on account of slower execution, higher material prices,costs associated with few facilities and provisions related to Chinese litigation.

Thermax reported a weak set of Q4FY18 numbers as revenue and profitability declined YoY, below our estimates. The key takeaway was the consistency and growth in order intake giving some green shoots to return to growth path Revenues came in at | 1310.1 crore, down 2.4% (below our estimates of | 1459.7 crore). For FY18, standalone revenue declined marginally by 0.5% YoY to | 3889 crore EBITDA came in at | 149.9 crore, with a decline of 1.4% vs our...

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.