Maintain Neutral on Thermax - Motilal Oswal

Thermax (TMX IN, Mkt Cap US$1.9b, CMP Rs711, Neutral)

Thermax reported 3QFY11 Revenues improved 66% YoY to Rs12.4b EBITDA margin was flat at 11.8% (est 12.2%, up 30bp).PAT of Rs1b, up 77% YoY, up 43% YoY

Energy segment reported revenue growth of 77% YoY, while Environment segment revenues grew 45% YoY as projects in waste and water management/air pollution control businesses reached critical milestones.

Thermax has not reported any major order during the quarter. Order intake has remained muted since 2QFY11. The management indicated that 20-25% of revenues during the year will come from two large orders a) Meenakshi Power (2x135MW, Rs10b) and Essar Power (4 boilers, Rs8.2b).

The company is well ahead of its growth guidance, posting revenues and profit growth of 58% and 63% YoY, during 9MFY11. We expect earnings CAGR of 27% over FY11-13. The key concern is sluggish order intake in recent quarters. Stock trades at 17.4x FY12E earnings. Maintain Neutral.

Source : Equity Bulls

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