MOSL: THERMAX (Neutral)-Margin-led earnings miss; order inflows robust
THERMAX: Margin-led earnings miss; order inflows robust
(TMX IN, Mkt Cap USD2.2b, CMP INR1362, TP INR1215, 11% Downside, Neutral)
Balance Sheet strength intact
- Revenue was in line with our estimate in 1QFY22, with a miss (15%) on operating profit. EBITDA margin stood at 6%, lower than our estimate of 7%, on account of higher commodity costs, an elevated freight rate, and lower productivity owing to COVID-led disruptions. Owing to a miss on operating profit, adjusted PAT came in 21% below our estimate.
- Order inflows almost tripled to ~INR17b on a low base YoY. However, it stood 13% higher sequentially, with robust orders from Refinery, Cement, and Steel sectors. Order book stood at INR61b (+17% YoY, with a book-to-bill of 1.2x), on the back of strong order inflows and moderate execution.
- TMX has been able to focus on working capital management, despite the execution of FGD orders. As a result, cash balances have further improved sequentially by INR2b (net cash of INR17.5b at the end of FY21).
- We reduce our FY22E/FY23E/FY24E EPS by 6%/4%/5% on account of elevated commodity costs. Sustainability of order inflows in 1QFY22 and ramp up in execution remains a key monitorable for our future outlook. We maintain our Neutral rating with a TP of INR1,215/share, based on 30x Mar'23E EPS.
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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