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Thermax
G o o d s h o w b u t m o d e r a t i o n t o f o l l o w …
Thermax declared a good set of Q1FY12 results led by robust execution
as sales came in at | 1044 crore that were above estimates (I-direct
estimate: |1052 crore) but higher than Street expectations. EBIDTA
margins at 10.9% in Q1FY12 were a function of higher share of EPC
revenues and higher input costs. PAT at | 80 crore in was in line with our
estimates. Order inflows de-grew for Q1FY12 at | 1444 crore and the
same remains key going into FY12E as Thermax will face challenges to
maintain the same kind of run rate in growth rates going ahead into FY12.
ƒ Order inflows for Q1FY12 reasonable but moderation to follow
Order inflows for the company in Q1FY12 stood at | 1444 crore, implying
a decline of 17% YoY. Given the current macro headwinds, we believe
the order inflows were reasonable. In terms of sectoral contribution to
order inflows: ferrous metals, textiles and cement contributed 34%, 23%
and 12% to the order inflows, respectively. In contrast, ongoing issues in
the power sector led to marginal order flows from the sector, thereby
contributing only 9% to the order inflows. Going ahead, we believe there
will be tepid order inflows until the macro challenges get corrected. The
backlog for Thermax as of Q1FY12 stands at | 5889 crore, implying a
moderate book to bill ratio of 1.2x.
ƒ Margins decline YoY owing to EPC project execution & input costs
EBITDA margins at 10.9% have declined owing to rising input costs and
high share of EPC revenues. Share of EPC revenues for Q1FY12 stood at
31% vs. 23% in Q1FY11. Similarly, the raw materials ratio inched up from
68% in Q1FY11 to 70% in Q1FY12. Going ahead, we have built in EBITDA
margins of 11.3% for FY12E.
V a l u a t i o n
Muted order inflows in the last couple of quarters will restrict Thermax
from maintaining the growth rates for FY12. Hence, we expect the
revenues and PAT to grow at a CAGR of 11% and 17% over FY11-FY13E,
respectively. Moderation in growth rates would lead to some cooling off
in the premium multiples that Thermax enjoys. We continue to value the
stock at 15x FY13E EPS and maintain our earlier target price of | 648.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Thermax
G o o d s h o w b u t m o d e r a t i o n t o f o l l o w …
Thermax declared a good set of Q1FY12 results led by robust execution
as sales came in at | 1044 crore that were above estimates (I-direct
estimate: |1052 crore) but higher than Street expectations. EBIDTA
margins at 10.9% in Q1FY12 were a function of higher share of EPC
revenues and higher input costs. PAT at | 80 crore in was in line with our
estimates. Order inflows de-grew for Q1FY12 at | 1444 crore and the
same remains key going into FY12E as Thermax will face challenges to
maintain the same kind of run rate in growth rates going ahead into FY12.
ƒ Order inflows for Q1FY12 reasonable but moderation to follow
Order inflows for the company in Q1FY12 stood at | 1444 crore, implying
a decline of 17% YoY. Given the current macro headwinds, we believe
the order inflows were reasonable. In terms of sectoral contribution to
order inflows: ferrous metals, textiles and cement contributed 34%, 23%
and 12% to the order inflows, respectively. In contrast, ongoing issues in
the power sector led to marginal order flows from the sector, thereby
contributing only 9% to the order inflows. Going ahead, we believe there
will be tepid order inflows until the macro challenges get corrected. The
backlog for Thermax as of Q1FY12 stands at | 5889 crore, implying a
moderate book to bill ratio of 1.2x.
ƒ Margins decline YoY owing to EPC project execution & input costs
EBITDA margins at 10.9% have declined owing to rising input costs and
high share of EPC revenues. Share of EPC revenues for Q1FY12 stood at
31% vs. 23% in Q1FY11. Similarly, the raw materials ratio inched up from
68% in Q1FY11 to 70% in Q1FY12. Going ahead, we have built in EBITDA
margins of 11.3% for FY12E.
V a l u a t i o n
Muted order inflows in the last couple of quarters will restrict Thermax
from maintaining the growth rates for FY12. Hence, we expect the
revenues and PAT to grow at a CAGR of 11% and 17% over FY11-FY13E,
respectively. Moderation in growth rates would lead to some cooling off
in the premium multiples that Thermax enjoys. We continue to value the
stock at 15x FY13E EPS and maintain our earlier target price of | 648.
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