Report

MOSL: THERMAX (Buy)-Subsidiaries drag overall performance

Thermax: Subsidiaries drag overall performance

(TMX IN, Mkt Cap USD1.9b, CMP INR1123, TP INR1295, 15% Upside, Buy)

 

  • Operating performance at consolidated level below expectations: Sales improved 18.7% YoY to INR10.4b (est. of INR11.1b) in 1QFY19. Despite strong growth in revenue, EBIDTA of INR693m (-3.9% YoY) was meaningfully below our estimate of INR1.0b on account of a weak performance of subsidiaries. Net profit increased 21% YoY to INR0.5b (est. of INR0.6b), supported by higher other income (INR310m v/s INR241m in 1QFY18) and share of profits from JV/associates (profit of INR3m v/s a loss of INR67m in 1QFY18).
  • Standalone performance improves off a weak base: At the standalone level, TMX's revenue rose 19% YoY to INR8.5b, led by a weak base of 1QFY18 (INR800m sales loss on account of GST-led ambiguity, and impact to the tune of INR350m on exports revenue as the JNPT port was infected by malware). EBIDTA rose 36.7% YoY to INR587m, with the margin expanding 90bp YoY to 6.9% led by better operating leverage. Adj. PAT rose 38.4% YoY to INR449m.
  • Weak performance at subsidiaries: Subsidiaries' revenue grew 17% YoY to INR1.9b, but net profit fell 50% YoY to INR41m due to (a) Danstoker booking a loss of INR41m v/s a profit of INR41m in 1QFY18, due to a weak performance from Boilerworks, (b) Thermax Europe delivering a break even performance for the quarter given provisions made for the anticipated future claims, as against a profit of INR39m in 1QFY18 and (c) Thermax Engineering and Construction profits declining to INR22m in 1QFY19 from INR72m 1QFY18.
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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