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Research
Thermax - 1QFY2014 Result Update - Angel Broking
Posted On : 2013-07-28 09:41:15( TIMEZONE : IST )
For 1QFY2014, Thermax's top-line and bottom-line performance was below our expectations as well as street estimates. The company reported a 12.3% yoy decline in top-line to Rs.863cr (our estimate was of Rs.944cr), mainly due to slow execution in the Energy segment (segmental revenue down by 17.2% yoy to Rs.634cr). The Management indicated procedural delays in a couple of government projects as one of the reasons for slow execution in the Energy segment. Revenue from the Environmental segment came in almost flat yoy to Rs.240cr. On the operating front, OPM contracted by 36bp yoy to 9.4% (our estimate was of 9.8%), mainly due to mark to market forex loss of Rs.2.4cr. Falling revenue and margin contraction led to a yoy fall of 25.2% in the company's PAT to Rs.50cr.
Order intake and backlog: The company reported an 85% yoy growth in order inflow to Rs.2,611cr on a consolidated basis, primarily due to it bagging a large order worth Rs.1,700cr for design, manufacture and commissioning of 9 CBFC boilers. Consequently, the consolidated order backlog is up 25% yoy to Rs.6,322cr, implying an order backlog of 1.4x its trailing 4-quarters revenue. The Management's commentary indicated dearth of large orders, with many companies deferring capex plans. However, order inquiries indicate visibility of short cycle orders.
Thermax- BW JV to weigh on the consolidated profits: The company's super-critical boiler plant is expected to be commissioned in 3QFY2014 and likely to incur losses (Rs.100cr plus) due to fixed costs and interest expenses (due to lack of orders). For 1QFY2014, Thermax-BW JV incurred a loss of Rs.7.8cr
Outlook and valuation: Thermax remains one of the most expensive stocks in our coverage universe trading at 17.9x FY2015 EPS estimates. Amid a weakening working capital outlook and dearth of large orders, we expect Thermax's return ratios to continue to remain subdued. We also expect Thermax- BW JV to weigh on the consolidated profits going forward as its utilization remains muted. Hence, we maintain our Neutral rating on the stock.
