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

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TMX (TMX) reported stable revenue growth for Q3FY15, led by execution of large projects, while the company reported strong EBIDTA margins (+250bps YoY) benefiting from lower commodity prices and better project mix. Order intake remained subdued at INR14.7bn (down 5% YoY) owing to fewer project closures in domestic market. Management maintained that while large projects in generation and steel sectors might take some time, captive power market will be driven by cement, fertiliser, refineries & basic chemicals. TMX was successful in winning good export orders (up 100% plus) in the quarter along with better working capital management. We maintain ‘BUY’ with a revised TP of INR 1,133 (earlier -INR984) as we introduce and roll forward our valuations on FY17EPS.

Stable execution with better OPMs; domestic market yet to recover

TMX reported steady execution across large projects, which led to a decent 13% YoY growth in revenue for the quarter. Also, with better mix and lower commodity prices, EBIDTA margin stood at healthy 11.5% (+250bps YoY). While base orders’ (small and packaged boilers) growth sustained healthy momentum, large projects in utilities, metals, etc., were a key drag, leading to weak order intake (down 5% YoY) and order book status (down 3% YoY).

Small clients driving captive market; large projects back ended

Management maintained decent demand was being witnessed from small entities (both domestic and foreign), food processing, paper, engineering, pharma, etc., account for large part of current orders. Management expects cement, fertiliser, refineries and base chemicals to drive captive orders over next few quarters.

LINK
https://www.edelweiss.in/research/Thermax--Stable-Operating-Quarter;-Capex-Recovery-Awaited;-Result-Update-Q3FY15/28206.html