Thermax, Deepak Nitrite, Brigade Enterprises, Crompton, Happiest Minds, PNC & More Q2 Review: HDFC Securities

HDFC Securities Institutional Equities

Thermax - Legacy projects impact profitability

Thermax Ltd. reported revenue/Ebitda/adjusted profit after tax of Rs 25.5/2.1/1.5 billion, a miss on our estimates by 0/10/10%. During the quarter, Thermax received Rs 0.66 billion as PSI incentive from Maharashtra government towards investment and job creation.

Thermax expects this incentive to repeat over next new quarters. The Ebitda margin of 8.3% was weaker than our estimate of 9.2%, largely due to execution or the low margin legacy FGD project. Order inflow during the quarter was robust at Rs 33.5 billion, taking the total order book to Rs 115.9 billion. International industrial infra order inflow of Rs 10.3 billion aided Thermax in surpassing its quarterly order run-rate of Rs 23-24 billion considering there was some slowdown in order bids from domestic market.

However, from H2 FY25 onwards, Thermax will see a ramp-up in large order bookings incrementally from domestic market (power/steel/refinery, etc) and it expects to achieve double digit growth. Thermax stands to benefit from the investment in clean energy, sustainability, decarbonisation, normalisation of the international market, ramping up of new products portfolio, and impetus for cleaner air and water.

We have recalibrated our estimates lower to factor in weaker margins. We maintain Buy on Thermax, with a target price of Rs 5,577 (55 times Dec-26E EPS, rollover).

Deepak Nitrite - Venturing into PC resin manufacturing

We maintain Sell on Deepak Nitrite Ltd., with a price target of Rs 1,656. We expect Ebitda and PAT CAGR of 30/26% over FY24-27E owing to change in product mix, addition of value-added products and increase in utilisation of capacities of existing products. RoE and RoCE to improve by 491/424bps to 22/20%.

The stock is currently trading at 41/29x FY25/26E EPS. We believe that the current valuation is already factoring in earning growth and expansion in return ratios. Ebitda/APAT was 17%/16% below our estimates owing to lower-than-expected revenue and offset by lower than expected raw material cost.

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