Thermax climbs 6%; Kotak ups target price; here's why
Thermax rose 6.24 per cent to hit a high of Rs 3,875 on BSE. This was, however, higher than Kotak's fresh target price of Rs 3,800 on the stock. The brokerage has 'Add' rating on Thermax.
- Jul 17, 2025,
- Updated Jul 17, 2025 11:16 AM IST
Shares of Thermax climbed over 6 per cent in Thursday's trade, as brokerage Kotak Institutional Equities upped its target price on the stock, saying the capital goods company is walking the talk and that there is a strong case of 20 per cent-plus earnings per share (EPS) growth over FY2025-28, compounded annually.
Following the development, the stock rose 6.24 per cent to hit a high of Rs 3,875. This was, however, higher than Kotak's fresh target price of Rs 3,800 on the stock. The brokerage has 'Add' rating on Thermax.
Kotak said FY25 was an active year for Thermax in terms of new offerings launched, growing traction of its fledgling offerings supporting the energy transition of the industrial consumer, starting phase II of R&D projects of relevance and forging partnerships, especially in the chemicals portfolio.
"We factor in 250 bps of Ebitda margin expansion over FY2025-28 (20 bps higher than earlier) and a slightly higher 13 per cent revenue CAGR (50 bps higher than earlier). We increase the multiple a notch to 40X, yielding a revised FV of Rs 3,800 (Rs 3,500) on roll-forward to June 2027," Kotak said.
The domestic brokerage said its assessment of FY2025 revenues suggests that dominant 77 per cent of the company's revenues reported double-digit Ebit margin and 14 per cent of business reported mid-teens Ebit loss margin. The remaining 9 per cent of business reported 6 per cent-plus Ebit margin, reflecting good profitability in the Industrial Infrastructure adjusting for TBWES, legacy projects and bioenergy sub-segments.
"We also assess that 75 per cent of revenues comprise businesses with strong growth potential—Industrial Products (40 per cent), TBWES (22 per cent), Chemicals (7 per cent) and biomass-based BOO ventures (5 per cent)," Kotak said.
The domestic brokerage said if 14 per cent of the loss-making revenue portfolio were to improve to a 6 per cent Ebit margin, it would yield a 260 bps higher margin or a 35 per cent boost to segment profits for Thermax.
"Coupled with a 13 per cent revenue CAGR, the same can drive a 22 epr cent CAGR in EPS over the next three years. In the above base case for margin improvement, we account for potential moderation in margin for select high-margin businesses in Danstoker (stabilizing gas prices globally) and TBWES (lumpy rant received in FY2025)," Kotak said.
Shares of Thermax climbed over 6 per cent in Thursday's trade, as brokerage Kotak Institutional Equities upped its target price on the stock, saying the capital goods company is walking the talk and that there is a strong case of 20 per cent-plus earnings per share (EPS) growth over FY2025-28, compounded annually.
Following the development, the stock rose 6.24 per cent to hit a high of Rs 3,875. This was, however, higher than Kotak's fresh target price of Rs 3,800 on the stock. The brokerage has 'Add' rating on Thermax.
Kotak said FY25 was an active year for Thermax in terms of new offerings launched, growing traction of its fledgling offerings supporting the energy transition of the industrial consumer, starting phase II of R&D projects of relevance and forging partnerships, especially in the chemicals portfolio.
"We factor in 250 bps of Ebitda margin expansion over FY2025-28 (20 bps higher than earlier) and a slightly higher 13 per cent revenue CAGR (50 bps higher than earlier). We increase the multiple a notch to 40X, yielding a revised FV of Rs 3,800 (Rs 3,500) on roll-forward to June 2027," Kotak said.
The domestic brokerage said its assessment of FY2025 revenues suggests that dominant 77 per cent of the company's revenues reported double-digit Ebit margin and 14 per cent of business reported mid-teens Ebit loss margin. The remaining 9 per cent of business reported 6 per cent-plus Ebit margin, reflecting good profitability in the Industrial Infrastructure adjusting for TBWES, legacy projects and bioenergy sub-segments.
"We also assess that 75 per cent of revenues comprise businesses with strong growth potential—Industrial Products (40 per cent), TBWES (22 per cent), Chemicals (7 per cent) and biomass-based BOO ventures (5 per cent)," Kotak said.
The domestic brokerage said if 14 per cent of the loss-making revenue portfolio were to improve to a 6 per cent Ebit margin, it would yield a 260 bps higher margin or a 35 per cent boost to segment profits for Thermax.
"Coupled with a 13 per cent revenue CAGR, the same can drive a 22 epr cent CAGR in EPS over the next three years. In the above base case for margin improvement, we account for potential moderation in margin for select high-margin businesses in Danstoker (stabilizing gas prices globally) and TBWES (lumpy rant received in FY2025)," Kotak said.