Hold Thermax; target of Rs 2613: Prabhudas Lilladher

Prabhudas Lilladher's research report on Thermax

Thermax (TMX) reported decent quarterly performance, with consolidated revenue growth of 16.8% YoY and EBITDA margin expanding 104bps YoY, owing to normalizing commodity prices and better Chemical segment margins (EBIT margin 16.3% vs 3.7% in Q1FY23). Domestic enquiry pipeline, continues to remain healthy for medium size order from food & Beverages, Chemicals, metals etc. while management remain pessimistic on large order in near term. Exports enquiry pipeline continues to remains strong from segments such as Waste Heat Recovery, Waste to Energy and Biomass. Indonesian subsidiary is likely to underperform in near term due to cost overrun in few projects, while Danstoker subsidiary is likely to witness gradual improvement with execution of better margins orders. We believe, TMX is well placed to gain from increasing thrust on energy transition & de-carbonization initiatives led by its 1) technical expertise, 2) strong balance sheet and 3) prudent working capital management. Stock is currently trading at PE of 50.3x/42.8x FY24/25E.

Outlook

We maintain our TP at Rs2,613, valuing it at PE of 43xFY25E (same as earlier) and change rating to ‘Hold’ from Buy given the recent sharp run up in stock price.

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