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Hold Thermax; target of Rs 1215: ICICI Direct

November 15
16:25 2019

ICICI Direct’s research report on Thermax

Thermax reported standalone revenues of Rs 1406 crore registering decent growth of 18.3% YoY (on a proforma basis, including B&H business). Consolidated revenues grew 12.5% to Rs 1605.9 crore YoY, predominantly led by growth in the energy segment. Proforma EBITDA came in at Rs 113.8 crore, up 36.2% YoY (vs. our estimate of Rs 100.1 crore), owing to a reduction in other operating expenses. Consequently, EBITDA margins improved 100 bps to 8.1% YoY (above our estimate of 7.0%). PAT (proforma basis) came in at Rs 64.9 crore, down 6.4% YoY. This was also impacted by lower other income at Rs 17.9 crore and higher tax on account of deferred tax impact. Consolidated order inflow came in at Rs 1723 crore, down 28% YoY (including Rs 471 crore FGD order).

Outlook

Expected focus on smaller and shorter orders (one to six months) over H2FY20 along with expected orders in cement, FGD & refinery sectors and recovery in international orders would aid order inflows and order backlog. Hence, it would aid revenue visibility for FY21E. We expect revenue, EBITDA, PAT CAGR of 10.0%, 14.9%, 25.4%, respectively, in FY19-21E. Consequently, margins are expected to normalise on the back of easing commodity pressure and product innovations in the medium term. We revise our target price to Rs 1215/ share and maintain HOLD rating.

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