Sell Thermax: Way2Wealth

Way2Wealth is bearish on Thermax and has recommended sell rating on the stock in its November 12, 2012 research report.

“Thermax’s H1FY13 results were in line with expectations, with a consolidated order backlog of Rs.44.12bn down by 24%yoy registering an order inflow of Rs.24.19bn with a degrowth of 8%yoy. Of the cons. Order backlog, the Energy segment contributed 78% while the rest came in from the Environment segment. Consolidated total income was down by 6% with a resultant PAT degrowth of 28%yoy signifying losses from its subsidiaries. PAT margins have fallen to 5.5% a sharp downslide of 160bps.”

“Order backlog for Thermax for Q2FY13 stood at Rs.44.12bn a sharp degrowth of 24%yoy with the energy segment contributing 75% & the remaining from the environment segment. The Energy segment degrew by 29%yoy whereas the environment segment degrew by 3%yoy. Order inflows stood at Rs.11.62bn which was flat with the environment segment registering a degrowth of 7%yoy. Order inflows was led by Power (33%) followed by EPC (21%), ferrous metals (25%), cement (9%), sugar (7%) and others (5%). Revenue for Q2FY13 stood down by 8% majorly led by degrowth from the energy segment down by 10%yoy & the environment segment down by 7% yoy. Barring NTPC there has been no power orders in the sector as of now. But there would be demand flowing in from the captive power segment due to continued power deficit for the next 3-4yrs which would benefit Thermax in the near term. Its expects to book at least one EPC order per qtr to sustain the order inflow runrate.”

“Increased competitive bids, reduced margins, muted performance of subsidiaries & subdued order inflows are likely to continue for the current fiscal. Fixed investments in the super-critical venture remains a concern as it will impact group profits unless turns profitable. At its CMP of Rs.593, we maintain our sell rating, in line with our previous recommendation, with the stock trading at a higher multiple of 18x FY14E EPS of Rs.33,” says Way2Wealth research report.

Institutional holding more than 40% in Indian cos

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