Thermax Q3 Results Review - Improving Prospect Pipeline: Motilal Oswal

Motilal Oswal Report

Thermax Ltd.'s Q3 FY24 result was below our estimate due to lower-than-expected margin and higher interest expense. Thermax reported revenue/Ebitda growth of 13%/16% YoY, while adjusted profit after tax declined 12% YoY for Q3 FY24. Order inflows, which were weak until H1 FY24, have started improving, while large-sized order inflows will commence mainly from FY25.

The prospect pipeline is improving fast, especially fueled by the power sector. Thermax is evaluating bids and will take a selective stance on thermal power bidding depending upon the margins and payment terms. We expect this to aid order inflows going forward.

The company’s new product launches are in initial stages of testing and trial and will yield results over next few years.

However, continued investments in equity and debt in the subsidiaries (Thermax Onsite Energy Solutions Ltd. and First Energy Pvt. Ltd.) will weigh on its balance sheet strength over the next few years.

We tweak our estimates and reiterate our 'Neutral' rating on the stock with a revised target price of Rs 3,060 (as we roll forward our valuation to March- 26E).

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