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Target: ₹2,178
CMP: ₹2,419.90
Thermax Ltd (TMX) has reported a robust revenue growth of 57 per cent y-o-y during the quarter, led by strong execution in Energy (61 per cent) and Environment (62 per cent) and the Chemical segment (22 per cent).
However, due to higher commodity prices and the execution of legacy FGD order in Environment segment, EBITDA margin fell 19 basis points (bps) year on year to 5.8 per cent.
Q1-FY23 order-book grew 56 per cent y-o-y (which is 1.4x TTM revenue), supported by 36 per cent y-o-y growth in new orders. Order inflow grew to ₹2,309 crore, supported by large-ticket order finalisation in the hydrocarbon segment, leading to an order book of ₹9,554 crore. It expects orders in the FGD segment to remain low to moderate, as government orders are currently witnessing some delays in finalisation.
The company expects a gradual recovery in the margin profile due to a favourable mix in the chemical segment and a correction in commodity prices.
TMX is currently trading at a P/E of 56x on a one-year forward basis, which is well above its one-year average P/E of 46x, implying limited room for further upside in the near term. Therefore, we revise our rating to Reduce and value TMX at a P/E of 43x on FY24 EPS.
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