MOSL: THERMAX (Sell)-Operating performance beat-impairment loss hurts profitability
​Thermax: Operating performance beat; impairment loss hurts profitability
(TMX IN, Mkt Cap USD1.9b, CMP INR1000, TP INR850, 15% Downside, Sell)
- Operational results ahead of estimates: Thermax’s (TMX) operating performance in 4QFY17 at standalone level was ahead of expectations. Sales grew by a muted 4% YoY to INR13.4b (est. of INR12.8b). EBITDA increased robustly by 23% YoY to INR1.5b (est. of INR1.2b) led by cost rationalization and higher share of service income, with the margin expanding 170bp YoY to 11.3% (est. of 9.6%). Adj. net profit was flat YoY at INR1.2b (est. of INR1.1b).
- Impairment loss on investments in subsidiaries: Thermax booked an impairment loss of INR1.3b in its JV (TBW) and two subsidiaries (Chinese sub and First Energy), given the bleak business scenario. Of the INR1.3b, TMX booked impairment loss of INR1.1b in its supercritical boiler JV TBW, given the weak outlook for thermal power equipment demand globally and in the domestic market. TBW recorded revenue of INR2.9b and recurring net loss of INR0.1b. At consolidated level, TMX booked loss of INR0.6b for TBW JV for its fixed asset impairment.
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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