Hold Thermax; target of Rs 3633: Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Thermax with a target price of Rs 3633 in its research report dated August 02, 2025.

Broker Research

August 04, 2025 / 14:36 IST

hold

26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Thermax

We downgrade our rating from ‘Accumulate’ to ‘HOLD’ given the persistent execution challenges, valuing the core business (excl. Green Solutions) at PE of 40x Mar’27E (same as earlier) with SoTP-derived TP of Rs3,633 (Rs3,629 earlier). Thermax (TMX) saw muted revenue growth of 4.1% YoY, impacted by lower execution, though EBITDA margin improved by 162bps YoY to 8.1%. The management maintains a cautiously optimistic outlook for FY26, expecting moderate revenue growth and margin improvement, contingent on timely execution and a steady order pipeline across domestic and export markets. While Water & Enviro continues to gain traction and Cooling benefits from ~Rs1.0bn pipeline, the Heating segment performance remains below expectations. Industrial Infra is anticipated to post double-digit growth driven by the execution of key projects. Chemicals is expected to be the fastest growing segment. TMX has a total of ~Rs300cr of annual exports exposure to the USA, which are currently clouded by ongoing tariff-related uncertainties. TMX’s Green Solutions portfolio is set to exceed 300MW, with an additional 300MW under development, ensuring steady growth.

Outlook

Execution challenges will remain a key monitorable in the short term. However, in the long term, TMX is well placed to gain from increasing thrust on energy transition & de-carbonization led by its 1) sustainable green industrial solutions in bioenergy, heating & cooling, chemicals and water, 2) technical expertise, and 3) prudent working capital management. The stock is currently trading at PE of 57.5x/50.7x on FY26/27E. Downgrade to ‘HOLD’.

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