MOSL: THERMAX (Neutral)-Miss led by GST-related dispatch issues
​THERMAX: Miss led by GST-related dispatch issues
(TMX IN, Mkt Cap USD1.7b, CMP INR980, TP INR930, 5% Downside, Neutral)
- Operational results impacted by GST-related dispatch issues: 2QFY18 operating performance at the standalone level was below expectations. Sales grew 2.2% YoY to INR8.6b (est. of INR9.3b), impacted by continued GST-led dispatch issues (input tax credit yet to be given to cap goods). 1QFY18 too had witnessed sales impact of INR1.2b on account of dispatch issues. However, TMX was able to recover INR1b of sales in 2QFY18. Gross margin shrunk 100bp YoY to 43.7%. EBITDA grew 11% YoY to INR0.9b (est. of INR0.8b), and the operating margin improved 90bp YoY to 10.0% (est. of 8.7%), led by a reduction in other expenses (-290bp YoY to 20.6%). Adj. net profit declined 5% YoY to INR0.6b (est. of INR0.62b), impacted by lower other income, higher interest expense and a higher tax rate.
- Weak performance at subsidiaries: Subsidiaries’ revenue was down 25% YoY to INR1.6b, EBIDTA was down 67% YoY to INR56m, and breakeven at PAT level. TMX guided for a loss at the subsidiaries level to continue, with a quarterly run-rate of INR10m on account of the weak performance at key subsidiaries like China. At the consolidated level, TMX’s revenue stood at INR10.3b (-3% YoY), impacted by the sluggish domestic and overseas business performance. EBIDTA stood at INR952m (+3.6% YoY), with the margin at 9.2% (+60bp YoY), led by cost-rationalization measures. Adj. PAT fell 27% YoY to INR568m on a higher tax rate (39% v/s 33% in 2QFY17).
Thermax is engaged in the manufacture and development of a range of products and solutions in heating, cooling and power generation. In addition, Co. is engaged in the provision of water treatment, waste management and air pollution controlling services and the manufacture of related fuel and water chemicals. Co., through its subsidiaries, is engaged in the manufacture and sale of industrial boilers suitable for various fuels, CFBC boilers for power plants; painting equipment; measuring, checking and pressure instruments; process control and regulating instruments; and provision of lease, hire purchase, bill discounting and other finance related services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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