Accumulate Thermax; target of Rs 3629: Prabhudas Lilladher

Prabhudas Lilladher's research report on Thermax

We revise our FY26/FY27 EPS estimates by -2.2%/-3.0% factoring in probable execution delays in Industrial Infra. Thermax (TMX) delivered a decent performance in Q4, reporting 11.6% YoY revenue growth, while EBITDA margin saw a marginal decline of 17 bps YoY to 9.7%. Management remains optimistic about FY26 revenue growth with better margins, supported by robust momentum in the Industrial Products segment. The Chemicals business is poised to contribute meaningfully in the medium term through continued product innovation and market expansion. Execution challenges in the Industrial Infrastructure segment, particularly in Bio-CNG and FGD, have largely been addressed, while the order prospects remain robust in refinery & petrochemicals, steel, cement, and waste-to-energy projects. In the Green Solutions segment, losses from FEPL are expected to reduce significantly, while TOESL is anticipated to maintain its steady growth trajectory.

Outlook

We believe TMX is well placed to gain from increasing thrust on energy transition & de-carbonization led by its 1) sustainable green industrial solutions in bio-energy, heating & cooling, chemicals, and water, 2) technical expertise, and 3) prudent working capital management. The stock is currently trading at a PE of 49.8x/44.3x on FY26/27E. We roll forward to Mar’27E and maintain ‘Accumulate’ rating valuing the core business (ex. Green Solutions) at a PE of 40x Mar’27E (40x Sep’26E earlier) with a revised SoTP derived TP of Rs3,629 (Rs3,456 earlier).