Reduce Thermax; target of Rs 1911: Geojit

Geojit's research report on Thermax

Thermax Ltd (TMX) is a leading energy and environment solutions provider. They offer integrated, innovative solutions in the areas of heating, cooling, power, water & waste management, air pollution control and chemicals. TMX delivered a strong performance in Q2FY23, with revenue growth of 41% YoY, led by strong execution in the Energy (39% YoY), Environment (44% YoY), and Chemical segments (48% YoY). The Q2FY23 order book grew by 46% YoY, supported by 22% YoY growth in new orders in H1FY23. Though order pipe line remains healthy, large orders are witnessing a slowdown. TMX sees traction in base orders (Rs300cr to Rs1,000cr) from sectors like oil & gas, refinery, petrochemicals, steel. EBITDA margin declined by 71bps YoY to 6.8% due to higher input costs in the energy and the chemical segments.

Outlook

The current expensive valuation and headwinds on margins remain a concern in the near term. We therefore, maintain our Reduce rating on the stock and value TMX at a P/E of 33x on FY25E EPS with a TP of Rs. 1,911.