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MOSL: THERMAX (Neutral)-In-line results; Depleting order book to limit revenue growth

Thermax: In-line results; Depleting order book to limit revenue growth

(TMX IN, Mkt Cap USD1.8b, CMP INR1074, TP INR1200, 12% Upside, Neutral)

 

  • Thermax's 3QFY20 operating performance was in line with our expectation. Increase in order inflows (+9% YoY) was mainly on account of a large FGD order received from Jharkhand. Order book stood at INR54.4b (-16% YoY).
  • Superior execution over the past 6-7 quarters has led to depletion of the order book, especially in the weak ordering environment. Thus, revenue growth momentum is likely to slow down, which is evident from the 3QFY20 results as top line declined 2% after 6 quarters of strong growth.
  • While we have maintained our EBITDA est., our EPS est. has been cut by 4-5% for FY20-22E on account of higher depreciation and lower other income. Maintain Neutral with TP of INR1,200 from INR1,170 earlier as we roll over to Sep'21E EPS. 

In-line operating performance; Order inflow helped by FGD order

  • 3QFY20 revenues were muted at INR14.1b (- 2% YoY). EBITDA growth of 5.4% YoY to INR1.1b was in line with our est., while EBITDA margin expanded 50bp YoY to 8.0%.
  • PBT declined 6% YoY to INR1.1b (7% miss) due to higher depreciation and lower other income. Effective tax rate was 19.4% (v/s 41% YoY in 3QFY19).
  • PAT grew 30% YoY to INR850m (in line with our est. of INR845m).
  • Segment performance: (a) Energy revenue (78% of overall revenue) declined 1% YoY to INR11.2b. PBIT margin expanded 40bp YoY to 5.8%. (b) Environmental revenue (14% of overall revenue) was down 8% YoY to INR2.0b. PBIT margin shrank 200bp YoY to 5.2%. (c) Chemical revenue (8% of overall revenue) grew 5% YoY to INR1.2b. PBIT margin expanded to 24.7% from 15.4% in the year-ago period. Margins in this segment were higher on account of greater proportion of specialty chemicals.
Underlying
Thermax Ltd.

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.

Provider
Motilal Oswal
Motilal Oswal

​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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