Thermax - 1QFY2013 Result Update - Angel Broking

Thermax 1QFY2013 number were below our estimates with revenue coming in at Rs.983cr (down 5.8% yoy), EBITDA of Rs.96cr (down 15.2%) and PAT of Rs.67.2cr (down 15.9%). EBITDA margins compressed by 108bps yoy to 9.8% for the quarter. Subsidiaries revenue declined by 5% yoy and posted a loss of Rs.15cr against a profit of Rs.6cr in 1QFY2012. However, the management expects positive reversal in its subsidiaries by the end of the year. Order inflow for the quarter was better than expected at Rs.1,412cr (-16% yoy, 54% qoq) taking the total order backlog to Rs.5,042cr (-26% yoy, 4% qoq) on a consolidated basis. Management expects more EPC order inflow to come from South East Asia and Africa. We maintain our Neutral rating on the stock.

Revenues decline, Subsidiaries surprise negatively: Revenue declined by 5.8% yoy during the quarter. Decline in revenue was due to environment segment, which saw fall in revenue of 8.1% yoy to Rs.243cr. Energy segment de-grew by 4.6% yoy to Rs.243cr with EBIT margins expanding to 10.7% from 10.1% yoy. Subsidiaries revenue declined by 5% yoy and posted a loss of Rs.15cr against a profit of Rs.6cr in 1QFY2012. Management expects EBITDA margins to range between +/- 150bps from current levels for the year.

Outlook and valuation: Thermax remains one of the most expensive stocks in our coverage universe trading at 17.9x and 16.9x on our FY2013E and FY2014E EPS estimates. Amid a weakening order inflow and working capital outlook, we expect Thermax's return ratios to continue to deteriorate. We also expect Thermax-BW JV to weigh in on consolidated profits going forward as its utilization remains muted.

Source : Equity Bulls

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