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Strong execution; weak orders
Thermax 1QFY11 PAT came at Rs799m (+21% YoY), 8% ahead of our
estimates. This was led by a strong 32% YoY increase in revenues. Ebitda
margins declined by 127bps as material costs rose sharply on account of
higher metal prices and more EPC work. Order book fell by 3%YoY,
despite Thermax winning market share, as order finalisations took longer.
While in the near term, order inflows are likely to remain weak,
Thermax’s initiatives to increase its addressable market should benefit it
in the longer term. Maintain O-PF, though continue to prefer BHEL.
1QFY12 results led by strong execution
Thermax’s 1QFY12 standalone PAT rose 21% YoY, to Rs799m and came 8%
ahead of our expectations. This was driven by a strong 32% YoY growth in
revenues to Rs10.4bn. Ebitda margins contracted by 127bps YoY, as material
costs increased sharply (325bps) on account of higher metal prices and
higher proportion of EPC work; the impact was partly offset by a decline in
employee expenses (88bps) and other overheads (112bps).
Consol PAT > Standalone PAT
1QFY12 consol PAT stood at Rs856m, ~7% above standalone PAT. This was
on the back of consol revenues being ~19% higher than the standalone
revenues, at Rs12,404m. All subsidiaries, other than the Chinese subsidiary
contributed to profits. We note that in FY11, Thermax had booked Rs53m
losses booked on subsidiaries/ JVs, which included Rs92m loss on B&W JV.
Slow order inflows, despite Thermax winning market share
While consolidated order backlog grew by 6% QoQ, it fell by 3% YoY, to
Rs68bn. This was on account of order inflows falling by 8% YoY. Thermax had
announced two large orders worth Rs7.7bn in 1QFY12 (cf. one order of
Rs5.8bn in 1QFY11), implying that order inflows for products business was
particularly slow. Management highlighted that Thermax has won market
share in 1Q, but order placements for the industry have gone down as
finalisations are taking longer. Enquiry levels, though, continue to be strong.
Maintain O-PF; but prefer BHEL in generation equipment space
In the near term, Thermax faces headwinds in the form of delays in order
finalisation. Moreover, intense competition, higher proportion of EPC work and
higher commodity costs could squeeze margins. However, strategic
enhancements should allow Thermax to tackle larger projects such as supercritical
boilers, ESPs, heating and cooling solutions for combined cycle gas
plants and environmental products over the longer term. Maintain O-PF,
though continue to prefer BHEL over Thermax in generation equipment space.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� �
Strong execution; weak orders
Thermax 1QFY11 PAT came at Rs799m (+21% YoY), 8% ahead of our
estimates. This was led by a strong 32% YoY increase in revenues. Ebitda
margins declined by 127bps as material costs rose sharply on account of
higher metal prices and more EPC work. Order book fell by 3%YoY,
despite Thermax winning market share, as order finalisations took longer.
While in the near term, order inflows are likely to remain weak,
Thermax’s initiatives to increase its addressable market should benefit it
in the longer term. Maintain O-PF, though continue to prefer BHEL.
1QFY12 results led by strong execution
Thermax’s 1QFY12 standalone PAT rose 21% YoY, to Rs799m and came 8%
ahead of our expectations. This was driven by a strong 32% YoY growth in
revenues to Rs10.4bn. Ebitda margins contracted by 127bps YoY, as material
costs increased sharply (325bps) on account of higher metal prices and
higher proportion of EPC work; the impact was partly offset by a decline in
employee expenses (88bps) and other overheads (112bps).
Consol PAT > Standalone PAT
1QFY12 consol PAT stood at Rs856m, ~7% above standalone PAT. This was
on the back of consol revenues being ~19% higher than the standalone
revenues, at Rs12,404m. All subsidiaries, other than the Chinese subsidiary
contributed to profits. We note that in FY11, Thermax had booked Rs53m
losses booked on subsidiaries/ JVs, which included Rs92m loss on B&W JV.
Slow order inflows, despite Thermax winning market share
While consolidated order backlog grew by 6% QoQ, it fell by 3% YoY, to
Rs68bn. This was on account of order inflows falling by 8% YoY. Thermax had
announced two large orders worth Rs7.7bn in 1QFY12 (cf. one order of
Rs5.8bn in 1QFY11), implying that order inflows for products business was
particularly slow. Management highlighted that Thermax has won market
share in 1Q, but order placements for the industry have gone down as
finalisations are taking longer. Enquiry levels, though, continue to be strong.
Maintain O-PF; but prefer BHEL in generation equipment space
In the near term, Thermax faces headwinds in the form of delays in order
finalisation. Moreover, intense competition, higher proportion of EPC work and
higher commodity costs could squeeze margins. However, strategic
enhancements should allow Thermax to tackle larger projects such as supercritical
boilers, ESPs, heating and cooling solutions for combined cycle gas
plants and environmental products over the longer term. Maintain O-PF,
though continue to prefer BHEL over Thermax in generation equipment space.
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