Thermax: Positive on recovery; cautious on timing ::Kotak Sec, report

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Positive on recovery; cautious on timing. 3QFY15 reflects continued weakness in domestic ordering being made good by overseas (grew 2X yoy). The domestic business may take another year, or so, to revive, eventually benefitting from various government initiatives. Overseas will support business in the interim, as the company takes its strategy of selective internationalization to the next level. Thermax is well-poised to capitalize on the economic recovery but its current price seems to have factored in a very sharp recovery, potentially leaving little scope for disappointment versus expectations.

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Thermax - Stable Operating Quarter; Capex Recovery Awaited; Result Update Q3FY15 ::Edelweiss

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Margins partially offset topline miss… • Thermax :: ICICI Securities, report

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Valuations ahead of fundamentals Thermax :: HDFC Sec, report

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Strong execution steals the show… • Thermax (TMX) :: ICICI Securities,

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Thermax (2QFY15) : Expensive valuations limit upside. Maintain NEUTRAL :: HDFC Securities

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Thermax: Multiple growth drivers :Motilal oswal

Beneficiary offew structural trends
TMX is benefiting from few structural trends: (1) increased energy pricing
(electricity prices up 15-20% over last 18 months) driving demand for energy
efficiency products (2) Hunt for alternative energy and TMX derives ~30% of
revenues from Green products (3) stringent government regulations and
increased environmental concerns (4) currency depreciation is also leading to
increased possibilities of exports (currently at 19% of revenues), etc.

Thermax Channel check on the captive power market ::Prabhudas Lilladher

Interaction with ISGEC: We interacted with ISGEC (formerly John Thompson),
the key competitor to Thermax (TMX) in the captive power market. Key
highlights are: 1) Good enquiry levels in plants upto 30-50MW from domestic
markets; however, enquiries for large plants are limited 2) Demand largely
coming from small industries like Food processing, Textiles, Pharma, Healthcare
etc. 3) Market for small power plants are likely to pick up significantly, given the
power shortage scene (highlighted enquiries coming from unconventional
segments like huge housing complexes) 4) Enquiry levels in export markets are
quite healthy due to a weak rupee (especially Africa) 5) Cethar vessels bidding
for very few projects in markets (augurs well for margins once the market
improves).
! TMX expects a growth in order inflow in FY14 and maintain margins in double‐
digits: TMX has been maintaining its order inflow run-rate of ~Rs12bn per
quarter for the last 3-4 quarters in this environment. Even in the current
quarter, the company is confident of maintaining a healthy order inflow runrate.
The company is quite confident of growing order inflow in FY14 by 8-10%
even on a higher base. The key sectors which the company is looking at for
order inflow includes Steel, Cement, Oil&Gas. The optimism is largely coming
from visible pipeline of orders, good enquiry levels and expectation of recovery
in the second half of FY14. The company is also looking at improved traction in
export markets like Middle East, Africa and South East Asia. While the company
acknowledges the fact that margins are under pressure due to high competition
in the market, it believes double-digit margins could be maintained due to tight
cost controls by the management and increased contribution from export
markets.

Thermax: Hold:: Business Line

Technicals: Ranbaxy, Thermax, NHPC, Gujarat Fluorochem, Kalpataru Power, Kolte-Patil Developers : Business Line

TRACKING TECHNICALS - MTT BUY CALL ON THERMAX:: Anand Rathi

Thermax:FY12 Annual Report - Key takeaways :: religare research,

FY12 Annual Report takeaways
Key takeaways from TMX’s FY12 annual report are: (1) working capital in FY12
continued to be higher than the historical trend on weakness in order inflows and
increase in receivable days, 2) profitability for the group was impacted by losses in
subsidiaries even as Danstroker grew ahead of expectations and 3) annual report
commentary emphasises on scale-up in exports (26%/22% of consol./standalone
sales) and services (12%/5% of consol./standalone sales) to counter the slowdown in
the domestic Power business. In our opinion, order inflows/earnings are unlikely to
surprise positively in H1FY13E, however valuations are likely to follow business
confidence indices. Maintain BUY.

Angel Broking - Thermax - RU4QFY2012 - Result Updates - PDF link

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Thermax - RU4QFY2012

Thermax Ltd, announced its Q4FY12 and FY12 results: Microsec Research

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Thermax Ltd, announced its Q4FY12 and FY12 results on 11^th May, 2012.

Quarterly Performance:

The Net Sales for the Q4FY12 arrived at INR1661.27 crore, which increased sharply by 31.54% on QoQ basis, but decreased by 4.83% on YoY basis. The EBITDA was up by 36.84% on QoQ basi,s but marginally down by 0.98% on YoY basis. The EBITDA Margin for the Q4FY12 was 11.15% ,up by 43bps on both YoY basis and QoQ basis. The company posted a net profit of INR129.81 crore, which was up by 35.94% on QoQ basis and 2.62% on YoY basis.

Annual Performance:

The Net Sales for FY12 arrived at INR5243.64 crore, which increased by 9.51% on YoY basis. The EBITDA came higher by 9.12% to INR185.31 crore for FY12. The EBITDA Margin was down by mere 4bps on YoY basis. The company posted net profit of INR406.86 crore, which increased sharply by 6.39% as compared to FY11.

Owing to the current economic slowdown of the country, especially in the power sector, the order backlog as on March, 2012 has declined to INR4828 crore as compared to INR6446 crore last year.

The Board has recommended a dividend of 350% for the FY2011-12.

Regards,

Team Microsec Research

Thermax India (TMX) Initiate UW: A late-cycle play HSBC Research,

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Thermax India (TMX)
Initiate UW: A late-cycle play
 With c80% exposure to mid- to late-cycle capex, we believe
orders are likely to fall by c16% in FY12 and c6% in FY13
 Weak orders should drive a c10% sales decline in FY13 and
a c130bp margin decline during FY12-13; EPS should bottom
in FY13, in our view
 Initiate coverage at UW and an EVA-driven TP of INR400; we
are c21% below consensus on FY13 EPS and expect
earnings cuts to drive stock lower

Thermax - Looking beyond the near‐term weakness ::Prabhudas Lilladher,

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We hosted the management of Thermax. Following are the key takeaways of the
meeting:
􀂄 Base business orders to grow, large orders taking time: Thermax reiterated its
ability to win base business orders of at least Rs5-6bn per quarter and hence,
does not expect the order flow to be below the Q3FY12 levels (Rs5.9bn). The
peak base business order flow was Rs10.5bn in FY08. The current capacities can
take base business orders up to Rs14bn per quarter. However, with very few
enquiries for large and captive power plants, the order flow is likely to be muted
for the next two quarters due to the given current issues like coal availability
and higher cost of funds. The company expects the recovery to happen by
H2FY13. Sectors like Cement, Steel and Oil & Gas (refineries) are likely to lead
the recovery apart from sectors like Food processing, Hotels and Hospitals which
are already investing. Power sector is likely to take time to recover.
􀂄 Margins can be maintained if recovery happens in the next two quarters:
Given the reduced order carry, sales are likely to de-grow by 8-10% next year.
However, efforts are being made to curtail the fall. Though business like
Chemical, Water, Absorption chiller, Services O&M, Standard boilers etc. are
likely to show growth, large business segments like EPC and Boiler & Heating
are likely to de-grow, leading to over all de-growth. Thermax will try and
maintain margins at ~11% range despite lower turnover by various levers it has
in the employee cost (Rs500m in variable pay and Rs350m in variable man
power). However, if the recovery does not happen by H2FY13, then it will have
to start taking orders even with lower margin to cover fixed cost.

THERMAX Cautious Outlook::Edelweiss

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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.

Thermax - Cautious Outlook; visit note; Hold ::Edelweiss PDF link

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Thermax (TMX IN, INR 537, Hold)

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.

Thermax: Weak order inflows affect visibility :: Kotak Securities

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Thermax (TMX)
Industrials
Weak order inflows affect visibility. Thermax reported sharp fall in backlog to Rs51
bn leading to guidance of decline in FY2013E revenues. The company may lower
margin requirement if inflows continue to remain sedate. It expects domestic business
to be challenging in 1HFY13E with steel and cement supporting recovery in 2HFY13E
and power recovering only in FY2014E. Supercritical JV on track for Sep 2012
completion. Retain REDUCE on back of weak inflows, competition and margin pressure.

Sell Thermax Ltd ; Target : Rs 401 ::ICICI Securities

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D i sma l   o r d e r   f l ows   a c c e n t u a t e   r i s k   t o   g r owt h…
Thermax delivered Q3FY12 results in line with our estimates. Reported
revenues stood at  | 1269 crore vs. our expectation of  |  1303 crore.
EBITDA margins at 10.7% were a tad above our estimate of 10.2%, even
though execution of EPC projects was high during Q3FY12.
Consequently, PAT declined 6% YoY to  | 96 crore. However, a
dwindling standalone order book at | 5104 crore (20% de-growth) crore
poses a significant concern for FY13E revenue visibility, going forward.
We expect revenue and PAT to decline by 7% and 6%, respectively, for
FY13E on a YoY basis.
ƒ Dismal order backlog weakens revenue visibility…
Significant headwinds in the power sector coupled with a challenging
macro environment, led to a 40% YoY de-growth in order intake at | 590
crore. The standalone order book at | 5100 crore, registered a 20% YoY
decline. A book to bill at 1.0x, coupled with client side delays in
execution, poses significant challenges to revenue visibility for FY13E.
Hence, we have revised down our revenue estimates for FY12 and FY13
by 2% and 12%, respectively.
ƒ …may lead to change in company’s order bidding strategy
Though  the  company  maintained  an  EBITDA  margin  of  10.7%  for  the
quarter, the sustenance of the same will come under attack if order
inflows do not pick up as the company may bid for low margin orders. As
such, we have factored the same in our estimates but perception risks will
persist. We expect Thermax to report an EBITDA margin of 11.3% for
FY13E.
V a l u a t i o n
Valuations at 16.8x FY13E EPS are demanding given the challenging
macro environment and dwindling revenue visibility. Hence, we have
assigned a lower P/E multiple of 13x (from 14x earlier) to arrive at a fair
value of | 401 (| 456 earlier) and rate the stock as SELL from HOLD