Hold Thermax; target of Rs 798: Prabhudas Lilladher

Prabhudas Lilladher's research report on Thermax

Thermax Ltd (TMX) reported weak set of numbers with revenue’s de-growing across segments- Energy (39% decline), Environment (26% decline) and Chemicals divisions (6% decline) respectively. Profitability impacted due to lower operating performance, decline in other income and higher depreciation expense. Order inflows (OI) came in at Rs9.5bn for 4Q, down 19% YoY with chemical segment growing at 31% YoY while energy segment reported of 24% YoY. The weak order inflows due to deferment of projects and delay in order finalization owing to Covid-19 led to a 2% YoY decline in order book to Rs52.4bn.

Outlook

Management indicated that the order inflows may be impacted for at least a year as industrial/private capex would be on hold mode. Though the real magnitude of outbreak and economy lockdown is difficult to assess, we believe near to medium term business outlook to remain challenging for the company. Thermax’s strong balance sheet and strict working capital management style would be key for revival in the long term. The stock is currently trading at 33.2x/22.6x FY21E/22E. We maintain our Accumulate rating on the stock with TP of Rs798.

Thermax 19062020

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