Thermax - Healthy Order Enquiries; Margin Revival A Key: Prabhudas Lilladher

Prabhudas Lilladher Report

We met with the management of Thermax Ltd., who highlighted that focus on clean energy, renewables, waste-to-energy, waste heat recovery, biofuels and energy efficient solutions across various industry to reduce carbon footprint is driving demand for company’s products and solutions.

Enquiry pipeline continues to remain healthy (two times compared to FY20), driven across sectors such as food and beverages, chemicals, pharma, metals etc.

Thermax is also increasing its focus on new energy solution such as hydrogen and fuel Cell. Management targets Industrial infrastructure Ebit margin to be 6-7% and industrial product margins to be ~10% over medium to long run.

Thermax’ green solution segment comprising of Thermax Onsite Energy Solutions Ltd. and First Energy Pvt. ltd. are performing well with internal rate of return of 20% and 16% respectively.

We also visited Thermax’ Shirwal plant that manufactures boilers ranging from 5-125 mega watt and has current capacity utilisation level of 75-80%. We believe, Thermax is well placed to gain from increasing thrust on energy transition and de-carbonisation initiatives led by its-

1. technical expertise,

2. strong balance sheet and

3. prudent working capital management.

However, Industrial Infrastructure Ebit margins revival will be a key monitorable. Stock is currently trading at price-to-earning of 52.6 times/44.8 times FY24/25E.

We maintain ‘Hold’ rating on stock with target price of Rs 2,613 (same as earlier), valuing it at PE of 43 times FY25E.

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