Thermax - 2QFY2013 Result Update - Angel Broking

For 2QFY2013, Thermax's top-line performance was below our estimates with revenue coming in at Rs.1,192cr (down 8.5% yoy). However, the company was still able to maintain double digit margins at 10.2% (decline of 57bp yoy), in spite of few low margin orders being executed during the quarter. Consequently, the net profit came in at Rs.91cr (down 10.3% yoy).

Key highlights:

The company reported a decline in its top-line by 8.5% yoy to Rs.1,192cr on account of weak execution in both, the energy and the environment segment, which saw a fall in revenue by 9.7% yoy to Rs.934cr and 7.3% to Rs.275cr respectively. Order inflow for the quarter declined by 10% yoy to Rs.1,162cr taking the total order backlog to Rs.4,984cr (decline of 24% yoy) on a consolidated basis. The company secured a major EPC order of Rs.280cr for a power plant in North India during the quarter. The company's Chinese subsidiary and Thermax Instrumentation (EPC arm of Thermax) are still making losses. Although, the Danstoker subsidiary has posted a profit of 1mn euros in 2QFY2012, it has lower margin orders.

Outlook and valuation: Thermax remains one of the most expensive stocks in our coverage universe trading at 18.6x 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. Hence, we maintain Neutral rating on the stock.

Source : Equity Bulls

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