Looking ahead, it is vital to track the profitability of our core operations, market adoption of new products, and the effective utilization of investments to drive demand for our innovative product lines.
Thermax Ltd: Promising Future Despite Q3 Performance
Thermax Ltd’s future outlook appears robust, despite a marginally disappointing performance in Q3FY24. The company marked a 14% yearly surge in order inflow, amounting to ₹2,506 crore in the last quarter, with the order book peaking at ₹10,717 crore by December-end.
Investor Interest and Stock Performance
This notable performance has attracted investor attention, with the company’s shares hovering merely 1% below their 52-week high, reaching ₹3,508.55 apiece on 8th February.
Optimistic Order Pipeline
Thermax expresses optimism regarding its order pipeline, particularly for large-scale projects, surpassing initial projections. While anticipating a temporary downturn in substantial orders due to decision-making delays, the company foresees promise for FY25. The order pipeline, especially from the thermal power sector for utility and captive power plants, shows considerable strengthening, both domestically and internationally. Moreover, the inquiry pipeline is on an upturn for sectors such as steel, hydrocarbons, and water, with mixed signals from ethanol, sugar, and refineries.
Ebitda Margin Analysis
Despite a marginal 20 basis point rise to 8.1% in Q3, the Ebitda margin garnered attention, especially the contraction in the industrial infrastructure segment due to lower project margins. The company emphasizes that there is substantial potential for enhancing profitability in this segment, reflecting opportunities for improved margins. Furthermore, the company anticipates significantly higher profits from bio-CNG projects than their historical engagement.
Business Segment Performance
The chemicals segment witnessed a profitable surge, although sustaining it may pose challenges. Nonetheless, Thermax targets substantial volume growth within this segment. Moreover, the green solutions segment is projected to witness enhanced profitability, particularly with the stabilization and potential profitability of its subsidiary, First Energy Private Ltd.
The Future and Stock Evaluation
Thermax is strategically positioned to benefit from its emphasis on clean energy, sustainability, decarbonization, and initiatives to enhance air and water quality. This focus, coupled with the broader uptrend in industrial stocks, accentuates the impressive 59% surge in its stock price over the past year. At present, the stock is valued at 51 times its projected FY25 earnings.
Conclusion
Despite concerns about profitability in the core business, slow product adoption rates, and the transition of investments to the order inflow phase in newer products, Thermax’s overall strong performance and strategic positioning provide a compelling case for its future outlook.
