Small orders will keep the strength strong for Thermax as large orders weaken

In Q3, flows declined 10% year-on-year (yoy) due to a lack of big-ticket orders and a higher base 2,204 crores. Order flow in the last quarter was driven by momentum in base orders, which are smaller order sizes typically down 200 crores.

What’s more, the management is confident of a strong pipeline in base orders going forward. A higher presence of base orders could mean faster execution of projects and revenue generation.

Amit Anwani, research analyst at Prabhudas Lilladher, said, “Given the absence of large orders, base and mid-range orders that typically get executed within a 12-month period will be critical and important for sustaining Thermax’s growth.” will be important.” Orders are expected from sectors such as management, sugar, steel, cement and chemicals.

“The chemicals segment, which was subdued due to supply chain, commodity inflation and other logistics challenges, is likely to see a good recovery going forward as most of the issues have been sorted out,” Anwani said.

Thus, Thermax’s order book provides good revenue visibility. In Q3, order book grew by 33% year-on-year 9859 crores, which works out to 1.3 times trailing twelve months revenue.

Besides, the government’s focus on clean energy and decarbonisation initiatives and improving private capex spending across industries are likely to help Thermax’s prospects.

On the margin front, stable commodity prices and freight cost have led to healthy growth in the last few months. In Q3, the consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) margin expanded 86 basis points year-over-year to approximately 7.9%. One basis point is 0.01%. revenue on 2,049 crore was up nearly 27% year-on-year due to strong growth in the energy and environment sectors.

Meanwhile, shares of Thermax are up about 9% so far in the calendar year 2023. Steep valuations are a concern with the stock trading at 42 times estimated earnings for FY24. Bloomberg Figures. “Sustainability of base-order inflow growth, improvement in execution and improvement in operating profit margin are key variables,” Nuwama Research said in a report on February 13.