Buy Thermax; target of Rs 3600 : ICICI Securities

ICICI Securities's research report on Thermax

Thermax’s performance has been under pressure over the last few quarters, mainly due to a drag from one of its two key segments – industrial infra. The segment had some legacy orders that have been impacting its profitability. However, the legacy order book (OB) is now fading rapidly; of ~INR 24bn of such orders received FY22 onwards, only INR 5bn of the OB is pending and a good chunk of this is likely to be completed in H2FY26. With the profitability overhang near-gone, it is now selectively building a much healthier OB and we expect this to positively reflect in its earnings growth over the next 2–3 years. Meanwhile, the company reported a subdued set of results in Q2FY26 with EBITDA declining ~19% YoY, dragged by industrial infra segment. Both OB and order inflow (OI) were up 6% YoY led by healthy OI in industrial products segment (+18% YoY). Upgrade to BUY, from Add with revised TP of INR 3,600 (INR 3,980 earlier).

Outlook

We upgrade to BUY, from Add, with a revised TP of INR 3,600 (earlier INR 3,980) given the recent correction in the stock price (in last three months).