MOSL: THERMAX (Buy)-Performance below estimate-strong execution offset by weak margins
Thermax: Performance below estimate; strong execution offset by weak margins
(TMX IN, Mkt Cap USD1.8b, CMP INR1058, TP INR1240, 17% Upside, Buy)
- Operating performance below estimates: Sales grew 29% YoY to INR14.4b (v/s our est. of INR13.4b). Gross margin shrank 220bp YoY to 45.2%. EBIDTA increased 12.4% YoY to INR1.1b (below our est. of INR1.2b), with margin contracting 110bp YoY to 7.5%. Adjusted net profit grew 11% YoY to INR652m (Adjusted for (a) INR0.9b of deferred tax for TBW recognized during the quarter, and (b) INR875m write-down for goodwill impairment in its Netherland subsidiary (our est. INR0.8b).
- S/A performance hurt by execution of lower-margin orders/higher cost: At the standalone (S/A) level, revenue grew 28% YoY to INR8.4b, helped by a pick-up in execution of projects in hand. Despite this, EBIDTA registered 8% YoY growth to INR690m, given (a) execution of lower-margin orders, (b) higher RM costs, and (c) higher other expense (19.4% v/s 18.0% in 3QFY18). EBIDTA margin shrank 150bp YoY to 8.1%. Adj. PAT increased 16.0% YoY to INR535m. During the quarter, Thermax demerged the Boiler and Heater segment and merged it with TBW, given the operational synergy between the two. Thermax expects the transaction to get completed by Apr'19.
- Healthy performance at subsidiaries: Subsidiary revenue grew 29% YoY to INR5.9b and EBIDTA grew 23% YoY to INR384m. EBIDTA margin stood at 6.5% (-40bp YoY) and Adjusted PAT at INR1.1b, supported by INR0.9b of deferred tax recognized during the quarter (as against profit of INR0.1m in 3QFY18).
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.