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As we understand from industry sources, the SKS Group has recently awarded an
EPC contract to Cethar Vessels for its upcoming IPP near Raigarh (300 MWX4), where
Thermax was also one of the strong bidding participant. We had built in certain large
value IPPs for Thermax between FY11E and FY12E, which we are now trimming down
to build in a lower growth rate, given this recent order loss and slow down in private
IPPs.
Revising down earnings for FY12E and FY13E
We are revising down our order intake assumption for FY11 and FY12 17% and
18%, respectively, building in slower thermal order intake, which we had earlier
maintained at INR 70 bn and INR 91 bn for FY11E and FY12E, respectively. This
revision is largely on the back of muted near-term outlook on the IPP market,
which is expected to revive post Q1FY12. Thus, we cut our FY12E & FY13E EPS
by 12.8% & 13%, respectively.
Stock down 35% since Nov 2010; market factors in concerns
Thermax has seen a sharp correction of more than 35% since November 2010
given macro concerns with respect to private sector capex in the power sector,
from where the company derives its major revenues. While we believe near-term
pain in terms of absence of large value ticket orders could persist for a while, the
stock will re-bound sharply once the private sector comes back into action.
Outlook and valuations: Sustainable business model; maintain ‘BUY’
Bleak outlook for the power equipment space has led to muted order intake for
companies exposed to both public as well as private utilities in the past two to
three quarters. Having said that, we believe, while Thermax is undergoing a
rough patch, the company’s prospects on long-term basis are bright, given its
strong clientele in the captive side, strong balance sheet, RoEs and RoCEs which
reflect its operating efficiency and execution. We maintain our ‘BUY/Sector
Outperformer’ recommendation/ rating on the stock, which is currently trading
at a P/E of 18.6x and 15.6x FY11E and FY12E, respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
As we understand from industry sources, the SKS Group has recently awarded an
EPC contract to Cethar Vessels for its upcoming IPP near Raigarh (300 MWX4), where
Thermax was also one of the strong bidding participant. We had built in certain large
value IPPs for Thermax between FY11E and FY12E, which we are now trimming down
to build in a lower growth rate, given this recent order loss and slow down in private
IPPs.
Revising down earnings for FY12E and FY13E
We are revising down our order intake assumption for FY11 and FY12 17% and
18%, respectively, building in slower thermal order intake, which we had earlier
maintained at INR 70 bn and INR 91 bn for FY11E and FY12E, respectively. This
revision is largely on the back of muted near-term outlook on the IPP market,
which is expected to revive post Q1FY12. Thus, we cut our FY12E & FY13E EPS
by 12.8% & 13%, respectively.
Stock down 35% since Nov 2010; market factors in concerns
Thermax has seen a sharp correction of more than 35% since November 2010
given macro concerns with respect to private sector capex in the power sector,
from where the company derives its major revenues. While we believe near-term
pain in terms of absence of large value ticket orders could persist for a while, the
stock will re-bound sharply once the private sector comes back into action.
Outlook and valuations: Sustainable business model; maintain ‘BUY’
Bleak outlook for the power equipment space has led to muted order intake for
companies exposed to both public as well as private utilities in the past two to
three quarters. Having said that, we believe, while Thermax is undergoing a
rough patch, the company’s prospects on long-term basis are bright, given its
strong clientele in the captive side, strong balance sheet, RoEs and RoCEs which
reflect its operating efficiency and execution. We maintain our ‘BUY/Sector
Outperformer’ recommendation/ rating on the stock, which is currently trading
at a P/E of 18.6x and 15.6x FY11E and FY12E, respectively.
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