Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We recently met the top management of Thermax (TMX) to understand
its industry outlook on both captive power & large utility equipment
businesses. Management expects revival across business segments over
the next 12‐15 months, led by expected cut in interest rates, and better
coal and land availability. Overall growth rate could however pick up
gradually, it believes. We maintain ‘HOLD’ on TMX with a TP of INR 462.
Heating & cooling up 8‐9%; market share intact
TMX’s heating and cooling (H&C) segment, comprising 30% of sales, has grown 8‐9%
for 9mFY12, driven largely by stable industrial ordering especially from food processing
and pharma industries. TMX commands 30% market share in heating, while it has more
than 80% market share in the cooling and chillers business, given strong customer
references, robust product portfolio and healthy execution track record. Its heating
business is likely to gain further momentum; given an expected rate cut going ahead.
Ordering slides owing to intensifying competition
TMX has seen a sharp decline in ordering, given a lull in large power plant orders in the
past 6‐8 months due to various macro‐economic challenges and coal and land
availability issues. Boilers segment for 9mFY12 has seen a major slowdown in ordering
and has had an average order inflow run rate of INR 5 bn/quarterly on a steady state
basis (ex‐large plants). This further slowed down to < 1 bn INR in Q3FY12. Management
does not expect to attain the normalized run rate of 5 bn INR in the next 2‐3 quarters,
given expectation of a gradual uptick and higher competition from the likes of BHEL in
the ‘heat recovery & steam generation’ and utility segments.
Outlook and valuations: Cautious; maintain ‘HOLD’
While we like TMX’s diversified business model with strong internal check mechanism
w.r.t. cash flow & client appraisal system, we believe the gradual uptick in captive &
power equipment market and sharp run‐up in recent times limit upsides in the stock.
We, therefore, maintain ‘HOLD/Sector Performer’ rating on TMX. The stock on a
consol basis trades at a P/E of 17.0x & 17.5x its FY12E &FY13E earnings respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We recently met the top management of Thermax (TMX) to understand
its industry outlook on both captive power & large utility equipment
businesses. Management expects revival across business segments over
the next 12‐15 months, led by expected cut in interest rates, and better
coal and land availability. Overall growth rate could however pick up
gradually, it believes. We maintain ‘HOLD’ on TMX with a TP of INR 462.
Heating & cooling up 8‐9%; market share intact
TMX’s heating and cooling (H&C) segment, comprising 30% of sales, has grown 8‐9%
for 9mFY12, driven largely by stable industrial ordering especially from food processing
and pharma industries. TMX commands 30% market share in heating, while it has more
than 80% market share in the cooling and chillers business, given strong customer
references, robust product portfolio and healthy execution track record. Its heating
business is likely to gain further momentum; given an expected rate cut going ahead.
Ordering slides owing to intensifying competition
TMX has seen a sharp decline in ordering, given a lull in large power plant orders in the
past 6‐8 months due to various macro‐economic challenges and coal and land
availability issues. Boilers segment for 9mFY12 has seen a major slowdown in ordering
and has had an average order inflow run rate of INR 5 bn/quarterly on a steady state
basis (ex‐large plants). This further slowed down to < 1 bn INR in Q3FY12. Management
does not expect to attain the normalized run rate of 5 bn INR in the next 2‐3 quarters,
given expectation of a gradual uptick and higher competition from the likes of BHEL in
the ‘heat recovery & steam generation’ and utility segments.
Outlook and valuations: Cautious; maintain ‘HOLD’
While we like TMX’s diversified business model with strong internal check mechanism
w.r.t. cash flow & client appraisal system, we believe the gradual uptick in captive &
power equipment market and sharp run‐up in recent times limit upsides in the stock.
We, therefore, maintain ‘HOLD/Sector Performer’ rating on TMX. The stock on a
consol basis trades at a P/E of 17.0x & 17.5x its FY12E &FY13E earnings respectively.
No comments:
Post a Comment