Accumulate Thermax; target of Rs 3857: Prabhudas Lilladher

Prabhudas Lilladher's research report on Thermax

We largely maintain our FY26/27E EPS estimates and upgrade the rating to ‘Accumulate’ from ‘Reduce’ due to recent sharp correction in the stock price. Thermax (TMX) reported weak Q3 with 7.9% YoY revenue growth and EBITDA margin declining by 53bps YoY to 7.5% impacted by weaker performance in industrials infra segment. Less profitable FGD orders are nearing completion, offering relief for Industrial Infra segment, further bolstered by increasing traction from Refinery & Petchem, Power, Steel and Cement sectors. Increasing acceptance of Heat Pumps will aid growth in its Industrial Projects segment. Additionally, the Chemical segment is expanding into construction and flooring chemicals, opening up new growth avenues despite anticipated short-term margin pressures from necessary investments. In the Green Solutions segment, while FEPL faced execution challenges due to the Tamil Nadu floods, the TOESL business continues to grow steadily. With subdued Q3 behind it, management is optimistic about a robust Q4.

Outlook

We value the core business (ex. Green Solutions) at a PE of 45x Sep’26E (50x Sep’26E earlier) with a revised SoTP derived TP of Rs3,857 (Rs4,275 earlier) due to prolonged execution challenges in Industrial Infrastructure segment. Upgrade to ‘Accumulate’.

For all recommendations report, click here