Thermax Q1: MOST expects PAT to fall 2.4% at Rs 65.6 cr

Motilal Oswal has come out with its first quarter (April-June) earnings estimates for the engineering & capital goods sector. The brokerage house expects Thermax to report a 43.1 percent degrowth quarter-on-quarter (degrowth of 2.4 percent year-on-year) in net profit at Rs 65.6 crore.

Revenues are expected to decrease by 35.8 percent Q-o-Q (down 4.1 percent Y-o-Y) to Rs 942.8 crore, according to Motilal Oswal.

Earnings before interest, tax, depreciation and amortisation (EBITDA) are likely to fall by 40.2 percent Q-o-Q (up 3.8 percent Y-o-Y) to Rs 100 crore.

Motilal Oswal report on Thermax

In FY13, EBITDA margin declined just 20bp, despite 12 percent decline in sales, which is commendable, considering poor fixed cost absorption. TMX is a beneficiary of lower commodity prices, as ordinary steel constitutes 15-20 percent of raw material cost and is largely procured on spot basis.

We expect the trend to continue in the coming quarters. Order intake has picked up from the lows and is sustaining at INR12b-14b per quarter (consolidated). Over FY13, order inflow is up 21 percent Y-o-Y. The management mentioned that visibility for FY14 on medium sized projects in comparison to FY13 has deteriorated.

However, TMX expects double-digit growth in order inflow during FY14. Consolidated PAT has been impacted by losses in subsidiaries (down 21 percent in FY13). Subsidiaries are making losses, largely due to cost overruns in Meenakhshi project and losses in Chinese subsidiaries, etc.

We expect improvement in profitability of subsidiaries, given that the Meenakhshi project is largely over and Danstoker has been performing well.