Thermax Q4 Results Review - Order Inflow Growth Remains Weak: Motilal Oswal

Motilal Oswal Report

Thermax Ltd. Q4 FY24 results beat our estimates, with in-line revenue and higher than-expected profit after tax on strong margins. Q4 revenue/Ebitda/profit after tax grew by 20%/37%/20% YoY. Order inflows stood at Rs 23 billion/Rs 101 billion in Q4/FY24 (up 2%/4% YoY), both lower than our estimates.

Inflows lacked large-sized orders during the year. Though the working capital cycle is still comfortable, free cash flow was affected by large capex, primarily for Thermax Onsite Energy Solutions/First Energy.

Borrowings jumped 55% YoY to Rs 12.5 billion. The company expects the finalization of largesized order inflows over the next few quarters.

We raise our estimates by 4%/10% for FY25/26 to factor in better margins. We revise our target price to Rs 4,180, based on a higher multiple for core business to bake in expected revival in private capex as well as thermal ordering.

We maintain our Neutral stance on Thermax as we believe that incremental investments in Thermax Onsite Energy Solutions Ltd./ First Energy Pvt. Ltd. will weigh on balance sheet strength and near- to medium-term return ratios.

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