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Execution robust but order inflows hold key…
Thermax declared a robust set of Q4FY11 numbers led by robust
execution as sales came in at | 1771 crore, which were above our
estimates (I-direct estimate: | 1598 crore). Higher than expected
execution led to higher than expected EBITDA and PAT of | 195 crore and
| 127 crore (up 28% YoY), respectively. On the margins front (EBITDA
margins for Q4FY11 at 11%), higher share of EPC revenues led to a
decline of 100 bps YoY in EBITDA margins. Order inflows de-grew in
Q4FY11 and the same remains the key in FY12E amid macro headwinds
for a re-rating, going ahead.
Revenue growth robust but order inflow muted
Revenue growth of 45% YoY was on the back of robust execution, mainly
in the EPC segment. Energy segment revenues were key growth drivers
in Q4FY11 (segment revenues grew 57% YoY) and continues to dominate
overall revenues with 79% share. Key highlight for Q4FY11 was muted
order flows, which will be a key variable, going ahead, into FY12E. Given
the current macro headwinds and its possible repercussions on the capex
cycle, we have tweaked our order inflow estimates for FY12E and FY13E.
EBITDA margins decline YoY owing to EPC project execution
EBITDA margins, though above our estimates, at 11% have declined
owing to rising input costs and high share of EPC revenues. However,
robust execution of backlog arrested the decline to some extent. Going
ahead, we believe the company will be able to maintain its margins
between 11% and 11.5% over FY12E-FY13E. Also, the JV with B&W is
progressing well as the construction of the new facility has commenced
and is expected to get commissioned by September 2012.
Valuation
Thermax’ current valuations at 17x and 14x its FY12E and FY13E EPS take
into account the robust performance exhibited in FY11. We believe that a
pick-up in order inflows will be highly crucial for a re-rating in FY12E. We
have lowered our target multiple in the wake of macro headwinds that will
slow down the order inflows at least in H1FY12E to 15x from 18x earlier.
We have arrived at a target price of | 648 and rate the stock as HOLD.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Execution robust but order inflows hold key…
Thermax declared a robust set of Q4FY11 numbers led by robust
execution as sales came in at | 1771 crore, which were above our
estimates (I-direct estimate: | 1598 crore). Higher than expected
execution led to higher than expected EBITDA and PAT of | 195 crore and
| 127 crore (up 28% YoY), respectively. On the margins front (EBITDA
margins for Q4FY11 at 11%), higher share of EPC revenues led to a
decline of 100 bps YoY in EBITDA margins. Order inflows de-grew in
Q4FY11 and the same remains the key in FY12E amid macro headwinds
for a re-rating, going ahead.
Revenue growth robust but order inflow muted
Revenue growth of 45% YoY was on the back of robust execution, mainly
in the EPC segment. Energy segment revenues were key growth drivers
in Q4FY11 (segment revenues grew 57% YoY) and continues to dominate
overall revenues with 79% share. Key highlight for Q4FY11 was muted
order flows, which will be a key variable, going ahead, into FY12E. Given
the current macro headwinds and its possible repercussions on the capex
cycle, we have tweaked our order inflow estimates for FY12E and FY13E.
EBITDA margins decline YoY owing to EPC project execution
EBITDA margins, though above our estimates, at 11% have declined
owing to rising input costs and high share of EPC revenues. However,
robust execution of backlog arrested the decline to some extent. Going
ahead, we believe the company will be able to maintain its margins
between 11% and 11.5% over FY12E-FY13E. Also, the JV with B&W is
progressing well as the construction of the new facility has commenced
and is expected to get commissioned by September 2012.
Valuation
Thermax’ current valuations at 17x and 14x its FY12E and FY13E EPS take
into account the robust performance exhibited in FY11. We believe that a
pick-up in order inflows will be highly crucial for a re-rating in FY12E. We
have lowered our target multiple in the wake of macro headwinds that will
slow down the order inflows at least in H1FY12E to 15x from 18x earlier.
We have arrived at a target price of | 648 and rate the stock as HOLD.
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