Accumulate Thermax; target of Rs 2158: Prabhudas Lilladher

Prabhudas Lilladher's research report on Thermax

Thermax Ltd. (TMX) reported a healthy revenue growth of 14.5% YoY, led by growth across all segment, while profitability was impacted due to higher commodity price and freight cost. Order inflow grew 57% YoY to Rs24.6bn, including FGD orders worth Rs8bn in Q3FY22. Order book stands strong at Rs73.9bn (1.3x TTM revenue) providing revenue visibility over next few quarters. Demand remains strong from sectors such as refinery, petrochemical, O&G, sugar/distillery, cement, metals, pharma, F&B, solar etc. and will be key growth driver going forward. We believe Thermax is well placed to capitalize on gradual economic recovery, private capex and thrust on clean energy & de-carbonization in long run given its 1) technical expertise, 2) strong balance sheet and 3) prudent working capital management. With strong order book and tender pipeline, we expect revenue/PAT to grow at CAGR of 21%/30% between FY21-24E.

Outlook

At CMP stock is trading at 74.6/51.2x/40.6x for FY22/23/24E. We roll forward to Mar’24 and maintain ‘Accumulate’ rating at TP of Rs2,158 (earlier Rs1,633), valuing it at PE of 43x FY24E (earlier 38x Sep’23E).