Thermax - Range Of Offerings On Energy Transition: Motilal Oswal

Motilal Oswal Report

We attended Thermax Ltd.’s analyst meet where company demonstrated its innovative technologies and bespoke solutions for the green solutions segment to cater to energy transition needs of customers. Through its two subsidiaries Thermax Onsite Energy Solutions Ltd. and First Energy Pvt. Ltd., company offers a range of products and services across bio energy and renewable.

It also has lined up plans to enter into coal gasification and electrical energy solutions including electric pumps.

We expect Thermax to continue to invest in these initiatives over next few years. These new products, though higher in pricing than traditional products by 30- 40% but will be return on investment accretive based on energy cost savings.

Order inflows have started improving with one large order of Rs 5 billion announced for bio-CNG plants.

Over FY23-26, we expect Thermax to post a 14% compound annual growth rate in revenue on the back of a strong order book (Rs 103 billion; order book/revenue: 1.1 times).

We estimate a 21% CAGR in earnings, aided by revenue growth and margin improvement. We continue to value Thermax at 38 times December, 25 estimated earnings and add value from green solutions.

We maintain 'Neutral' rating on the stock with a target price of Rs 2,740 and would look for better entry points in the stock.

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