Thermax Limited, a leading engineering solutions provider in the energy and environment sectors, is trading at a 37 percent discount from its 52-week high. With strong fundamentals, including a 24.85 percent revenue CAGR, it presents an opportunity to look into the company.
The global chemicals industry is looking for significant growth in 2025 which is projected to expand from $6,182 billion in 2024 to $6,324 billion. The key trends include a strong focus on sustainability, with companies investing in green chemistry and recycling technologies. The Asia-Pacific region, particularly India and China to lead production. Digital transformation and electrification of processes are also critical as firms adapt to evolving market demands and regulatory pressures while ensuring resilience and innovation in a competitive landscape.
Price Movement
Thermax Limited‘s stock in Wednesday’s session is trading at Rs. 3,813 per share up by 2.06 percent from the previous closing price of Rs. 3,736. The stock has delivered a return of around 20 percent in the past year and has outperformed the Nifty Index in the same period.
Business Segments
As per the recent September 2024 results, the company recognizes its revenue from Industrial products which contributed around 39.67 percent, Industrial Infra contributed around 46.61 percent, Green Solutions contributed around 6.56 percent, and the remaining 7.13 percent from Chemicals.
Orderbook and its Performance:
The Q2 order book shows diverse sectors, with mining leading at 32 percent, followed by Food and Beverages at 8 percent, paper, and pulp at 7 percent, and sugar or distillery at 6 percent. The company has a stable order base with strong there is enquiry inflow from the sectors like steel, chemical, and F&B segments, followed by positive momentum in the biofuel sector.
The consolidated performance shows outstanding growth, with Industrial Infra showcasing an exceptional 167 percent year-on-year increase in Q2 order booking, reaching Rs. 1,748. The total order booking grew by 70 percent per year on year totalling Rs. 3,353. The company’s overall order balance increased by 13 percent year on year to Rs. 11,593 as of YTD September 2024.
Future Outlook:
The company is expanding its renewable energy portfolio through First Energy Private Limited (FEPL) which aims for a 600 MW capacity in the near term and targets 1 GW by FY27-28. They have approved an initial investment of Rs. 700 crores. In the hydrogen sector, Thermax plans to invest Rs. 100 crores over the next 18 months to develop products and establish manufacturing capabilities for a 100-300 MW capacity. Additionally, Thermax expects to continue receiving government incentives based on production over the next three years.
Financial Performance
Their Q2FY25 results show revenue from operations of Rs. 2,612 crore which increased by 13.46 percent year on year, from Rs. 2,302 crore in Q2FY24 and a 19.59 percent increase from Rs. 2,184 crore in Q1FY25. Their net profit increased by 24.52 percent year on year, from Rs. 159 crores in Q2FY24 to Rs. 198 crores in Q2FY25. Quarterly, the profits were up by 81.65 percent from Rs. 109 crore.
The debt-to-equity ratio was 0.25 times slightly declining from 0.16 times in FY23. The RoE in FY24 stood at 15.48 percent improved from 12.25 percent a year ago. However, the RoCE stood at 17.87 percent which has improved from 14.53 percent in FY23.
Shareholding Pattern
As of September 2024, the shareholding pattern includes promoters holding a share of 61.98 percent stake in The Thermax, Foreign Institutional Investors (FII) holding around 15.38 percent, Domestic Institutional investors (DII) standing at 12.72 percent, and public holdings standing at 9.92 percent.
Brokerage Target
Motilal Oswal, a prominent brokerage firm, had initiated a ‘Neutral’ Target at Rs. 4,400 with a potential upside of 17.45 percent from the previous closing price. The brokerage expects revenue to grow 22 percent year on year and EBITDA margin to expand 130bp year on year to 9.4 percent. The key monitorable includes the large order pipeline, margin outlook, and industrial infra and chemicals segment.
About the company
Thermax Ltd is headquartered in Pune and is a multinational engineering conglomerate that was established in 1966. They specialize in sustainable solutions for energy and environment. They offer integrated services in heating, power generation, cooling, water treatment, and air pollution control. Their business model focuses on designing and manufacturing large boilers, turnkey power plants, and wastewater treatment systems. Thermax operates globally with a strong focus on innovation and sustainability while helping industries improve resource productivity while minimizing environmental impact.
Written by Santhosh S
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