Thermax shares up 50% in 2023 so far; is more steam left in this energy player?

Shares of Thermax Ltd have remained range-bound since the declaration of its results. The company announced its earnings about a week ago and the stock movement has remained flat since then. Even the analysts have a mixed view on the counter after a strong earnings show in the September 2023 quarter.

Thermax's net profit increased 45 per cent on a year-on-year (YoY) basis to Rs 158.6 crore in the September quarter, due to higher revenues and stabilised commodity cost. The domestic energy and environment solutions provider had posted a profit of Rs 109.14 crore in the corresponding quarter last year.

Thermax posted a 11 per cent rise YoY in the operating revenue at Rs 2,302.46 crore in the September 2023 quarter compared to Rs 2,075.26 crore in the same period a year ago. The Ebitda came in at Rs 270.48 crore for Q2FY24, up 50 per cent YoY, while Ebitda margins rose by 289 basis points (bps) to 11.4 per cent.

Pune-headquartered Thermax has been voted as the winner of the 2023 IMD Global Family Business Award. Incorporated in 1966, Thermax has grown to become a worldwide reference in providing sustainable solutions in energy and environment.

The conglomerate owns 17 domestic and 20 overseas subsidiaries. The group operates through 34 international offices and 14 manufacturing facilities, including ten in India and four overseas, with a presence that spans more than 90 countries around the world.

Shares of Thermax traded flat during the trading session Monday, hovering around Rs 2,900, with a total market capitalization of Rs 34,800 crore. It has gained about 50 per cent in the year 2023 so far. The stock has gained about 60 per cent from its 52-week low at Rs 1,803.35 in December 2022.

Industrial Products saw enhanced performance due to increased revenue and improved margins from stabilised commodity costs. Strong EBITDA growth of 46 per cent YoY, while margins improved 211 bps on stable raw material cost. Going forward, Thermax will commence more lucrative projects, aiding full-year margins, said LKP Securities, with a buy rating, target price of Rs 3,325.

Prabhudas Lilladher said that Thermax is well placed to gain from increasing thrust on energy transition & de-carbonization initiatives led by its technical expertise, strong balance sheet and  rudent working capital management. "We roll forward to September 2025E and maintain ‘Hold’ rating with revised target price of Rs 2,771," it said.

YES Securities believes Thermax is well placed to capitalize on revival of private capex given its strong balance sheet, prudent working capital management, and recent technological tie‐ups. However, the brokerage has downgraded stock to 'reduce' from 'neutral' with a target price of Rs 2,760 after the recent run-up in the stock.
 

"Management expects H2FY24 to see improved order inflows while margin could moderate a bit from Q2FY24 levels. The company is focused on the energy transition theme and is striving to create tech-enabled differentiation. This is reflected in building up employee capabilities in differentiated terms such as digital which has led to a jump in employee costs," said YES Securities.

Also read: Stock recommendations for November 13 2023: NDMC, Bharat Electronics & Lemon Tree

Also read: Zomato shares zoom over 100% in 2023 so far; time to book profit or more steam left?