Thermax Ltd. share price target

Thermax's Q1FY16 results were just in line with our and consensus estimates at the operatingleveldespitestrongexecutionintheEnergydivision;thiswasmainlybecauseof lowerthanexpectedmargins.Managementreiteratedthatorderingactivitywillcontinueto...

Karvy initiates coverage on Thermax Ltd with a Buy Rating. Order book and revenues to grow at CAGR of 7% and 8.4% during FY15-17E. Boilers and Power EPC & services segment to contribute to over 60% and 20% of revenues by FY17E in the standalone business. Exports business to contribute 35% by FY17E and is setting manufacturing hub in Indonesia for operationalization by FY18. Going forward operating subsidiaries to become potential value creator in economic up cycle. Thermax - First Energy, synergistic effect to play out in long term. We initiate coverage on Thermax with a Buy' rating for a target of Rs.1,239 representing an upside potential of 16% based on standalone FY17E EPS of Rs.33.9 at 33.6x P/E (+1 SD on 1yr forward P/E during FY05-15) and added Book Value (BV) of investments in subsidiaries of Rs.41/share at 1x BV, subsidiaries could incur losses during FY16-17E.

Thermax reported below estimate operational results with EBITDA coming in at Rs 1.3bn (est. Rs 1.6bn). Miss was driven by lower than expected revenue growth and margins. PAT was in line but was aided by other income.

Thermax reported below estimate 3QFY15 PAT of Rs 762mn driven by lower than estimated other income. Operationally, results were in line. Order inflow of Rs 12.3bn (-10% YoY) was also in line with estimates.