Fundamental Analysis Of Thermax: The engineering industry is the backbone of a nation’s advancement and prosperity. Over the decades, multiple companies has been established in India. These companies try to overcome capital adequacy problems, low productivity, regulation, shortages of raw materials, and other factors that make them more capital-intensive in nature to run their businesses.

One such company is Thermax limited, one of India’s multinational engineering conglomerates that has stood the test of time over the decades. We’ll attempt to understand the fundamental analysis of Thermax Ltd. and how it stands out from the rest of the market. 

Fundamental Analysis Of Thermax

We’ll begin with a company overview, then go on to business segments, then the market overview, business sectors, financial analysis, and future objectives, and finally a summary to round off the article.

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Company Overview

Thermo-Dynamics Pvt. Ltd. was incorporated on June 30, 1980. Later, on July 1st, Wanson (India) Ltd. and Thermax India (Pvt) Ltd. merged and was renamed as Thermax Pvt. Ltd. 

On July 1, 1982, Tulsi Fine Chemical Industries Pvt. Ltd. and Kailas Castings Pvt. Ltd. joined the company. With effect from July 1, 1989, the company became a public company.

Thermax Ltd is an engineering company headquartered in Pune, Maharashtra. It provides sustainable solutions for energy and the environment. It offers a portfolio of products for heating, cooling, water and waste management, and specialty chemicals.

The company also designs, builds, and commissions large boilers for steam and power generation, turnkey power plants, waste heat recovery systems, industrial and municipal wastewater treatment plants, and air pollution control projects.

The group consists of seven wholly-owned domestic subsidiaries and 21 wholly-owned overseas subsidiaries. With a presence in 88 countries and 14 sites, the business serves clients through a comprehensive sales and service network that includes Asia, Southeast Asia, the Middle East, Africa, Europe, and the Americas, as well as manufacturing facilities in Poland, India, Denmark, China, Germany, and Indonesia. 

Business Segments

The company deals in four business segments; industrial products, industrial infrastructure, green solutions, and chemicals.

Here is an overview of the Revenue and Profit Before Tax (PBT) earned by each of these segments in FY23:

SegmentsPBT(Cr)Revenue (Cr)
Industrial Products2743,338
Industrial Infra2173,928
Green Solutions15363

Industry Overview

India’s capital goods manufacturing industry serves as a strong base for its engagement across sectors such as engineering, construction, infrastructure, and consumer goods, amongst others.

The largest industrial sector in India is the engineering industry. It represents 63% of all global collaboration and 27% of all factories in the industrial sector. 

The growth of capacity in sectors including infrastructure, power, mining, oil and gas, refineries, steel, autos, and consumer durables is what is driving demand for engineering sector services.  1.8% of India’s GDP and 12% of its industrial output come from the capital goods industry. The capital goods market was valued at $43.2 billion in FY22.

In 2021, India’s imports of electrical machinery grew to $16.1 billion. The Indian electrical equipment industry provides 1.5% of the total GDP and around 8% of the value of the manufacturing sector.

By the year 2025, the market share for electrical equipment in India is expected to grow by US$33.74 billion, or 9% CAGR. During the same period, the household electrical equipment market is expected to grow by 12% annually to US$ 72 billion.

Production of heavy electrical equipment in India totaled Rs. 168,949 crore (US$ 21.15 billion) in FY21.

SWOT analysis


  • The company has a healthy Interest coverage ratio of 20.21.
  • The company has an efficient Cash Conversion Cycle of 21 days.
  • The company has a high promoter holding of 61.98% and FIIs have increased their shareholding pattern.
  • The company has diversified its business into four segments.


  • Not able to generate enough Net Cash Flow.


  • Government policies and CAPEX outlays to support green technologies will spur the clean energy portfolio of Thermax.


  • Huge competition and alternatives in the market.
  • Increasing raw material prices can impact Company’s profitability. 

Thermax – Financials

Revenue & Net Profit Growth

Over the last five years, the operating revenues of Thermax Ltd. have grown at a CAGR of 6.25%, from Rs 5,973 crore in FY19 to Rs 8,089 crore in FY23. The annualized growth of operating profit and net profit is high at 5.49 % and 6.66% on a low base, respectively.

The table below shows the operating revenue, operating profit, and net profit of the company for the previous five fiscal years.

Fiscal YearOperating sales(Cr)Operating profit(Cr)Net profit(Cr)
5-yr CAGR6.25%5.49%6.66%

Operating and Net Profit Margins

The company is trying to achieve higher margin rates by reducing direct expenses, improving inventory management, and implementing automation in the plant, which slightly boosted its margins in FY2023.

Fiscal YearOperating Profit Margin(%)Net Profit Margin(%)

Return Ratios: RoCE and RoE

Profitability ratios have improved substantially year after year. The firm has increased its turnover and utilized its money more effectively and economically by cutting irrelevant expenditures.

Fiscal YearROCE(%)ROE(%)

Debt/Equity & Interest Coverage ratio

Short-term loans are usually required in the manufacturing business to pay suppliers, procure raw materials, and pay wages.

The firm has effectively maintained debt-to-equity which shows the stability of the company’s ability to raise capital and ratio throughout the years by appropriately using working capital, and the interest coverage ratio is slightly reduced from the last 5 years.

Fiscal yearDebt/EquityInterest Coverage

Fundamental Analysis of Thermax – Key Metrics

Before we hit the end, let us quickly revise the key metrics of the stock.

CMP₹2,274Market Cap(Cr.)₹26,910 Cr
EPS₹ 37.8Stock P/E59.8
Promoter Holding61.98 %Book Value₹ 325
Debt to Equity0.21Price to Book Value6.93
Net Profit Margin5.57%Operating Profit Margin7.92%

Future Plans of Thermax

  • Thermax has partnered with Australia-based Fortescue Future Industries to develop fully integrated green hydrogen projects for commercial and industrial customers in India.
  • Thermax to set up a refinery for sulphur recovery block on a lump sum turnkey basis.
  • The company planned to increase the capacity of the coal gasification facility for methanol production in association with IIT Delhi.
  • The Company plans to achieve operational efficiency, acquire new customers, and generate leads through TCAs and Channel Business Group. With the launch of new products in Water & Waste Solutions Process Heating and  Air Pollution control.

In Conclusion

As we conclude our fundamental analysis of Thermax Ltd., we believe that India’s engineering industry will experience a significant upturn as government capital expenditures on infrastructure increase, eventually benefiting relevant companies.

Thermax has four decades of expertise and has maintained outstanding financials throughout. Thermax has a higher stock P/E ratio of 59 than the industry average of 27, indicating that it is expensive.. Therefore, investors should closely monitor upcoming financials and the proper utilization of capex by the company.

With that, we conclude this article on the fundamental analysis of Thermax Ltd.

We hope you find this article informative and educational. Happy Investing!

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