PL Stock Report: Thermax (TMX IN) - Management Meet Update - Healthy order enquires; margin revival a key - HOLD

Thermax (TMX IN) - Amit Anwani - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: HOLD | CMP: Rs2,721 | TP: Rs2,613

Management Meet Update - Healthy order enquires; margin revival a key

We met with Mr. Ashish Bhandari, MD and CEO of Thermax (TMX), 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 (2x compared to FY20), driven across sectors such as Food & Beverages (F&B), Chemicals, Pharma, Metals etc. The company 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. TMX’s Green Solution segment comprising of TOESL and FEPL are performing well with IRR of 20% and 16% respectively. We also visited TMX’s Shirwal plant that manufactures Boilers ranging from 5-125MW and has current capacity utilization level of 75-80%.

We believe, TMX is well placed to gain from increasing thrust on energy transition & de-carbonization 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 PE of 52.6x/44.8x FY24/25E. We maintain ‘Hold’ rating on stock with TP of Rs2,613 (same as earlier), valuing it at PE of 43x FY25E.

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