Reduce Thermax; target of Rs 3923: Prabhudas Lilladher

Prabhudas Lilladher's research report on Thermax

We revise our FY25/FY26E EPS by +4.4%/+3.6% factoring in strong traction in Green Solutions. Thermax (TMX) reported 19.6% YoY revenue growth with EBITDA margin rising 123bps YoY to 9.9%. Although large orders were soft, order enquiries remain robust across steel, chemical, F&B and biofuel. Meanwhile, international order pipeline has improved this year against previous years. Water business continues to see growth opportunities in desalination, effluent water treatment etc. In Chemicals segment, TMX is expanding into new customer segments while continuing to add new capabilities. Bio-CNG faced certain technical setbacks in rice straw feedstock based projects which might take a few quarters to resolve. We believe TMX is well placed to gain from increasing thrust on energy transition & de-carbonization initiatives led by its 1) sustainable green industrial solutions in bio-energy, heating & cooling, chemicals, and water, 2) technical expertise, and 3) strong balance sheet & prudent working capital management.

Outlook

We roll forward to FY26 and re-assign ‘Reduce’ rating with a revised SoTP derived TP of Rs3923 (Rs3017 earlier), valuing the core business (ex. Green Solutions) at a P/E of 50x FY26E.

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