Buy Thermax; target of Rs 2600: Sharekhan

Sharekhan's research report on Thermax

Thermax Limited’s (Thermax) consolidated Q4 performance was broadly in-line with estimates, led by strong sales and profitability. However, order intake declined 34% y-o-y due to absence of large orders. The company is realigning its strategies to focus on innovative products in the field of green energy which would drive the growth going forward. Further, it wants to scale up the chemicals business and aims to expand capacity. We believe increasing contribution of high margin subcomponents and innovative products coupled with stability in commodity prices, would lead to substantial margin expansion going forward.

Outlook

We maintain a Buy on Thermax with a revised PT of Rs. 2,600, as we expect the company’s new focus areas would yield results in the long-term despite near-term headwinds. Further, strong cash & investments of Rs. 2,741 crore and execution capabilities give us comfort.