Prabhudas Lilladher is bullish on Thermax and has recommended accumulate rating on the stock with a target of Rs 801 in its April 15, 2014 research report.
"We interacted with the management of Thermax to understand the near term outlook and long term growth drivers. While near term outlook continues to be weak in domestic market, they expect market to recover in H2 FY15, while the export market continues see good traction. In order to combat the cyclical nature of project businesses and securing long‐term growth, the company has laid down a road map which includes, (a) balancing portfolio between standard products, projects and the services business, (b) developing new businesses and product portfolios that will drive growth over the next few years, and (c) consolidate and grow the international business, with a focus on Southeast Asia, the Middle East and Africa. We believe the company has managed the down turn well and consolidated to benefit significantly from the expected recovery. Maintain accumulate."
"TMX highlighted that the market for standard products continues to grow, with demand largely coming from sectors like food processing, chemicals, sugar, and refinery etc. The company expects to end the year with higher order book as compared to the previous year, largely driven by good base business orders and large orders from refinery/petro‐chemical segment. They continue to see good traction in the international markets especially in Middle East, Africa, South East Asia. We expect TMX to end the year with standalone order inflow of Rs 54.5bn (up 12% YoY). TMX believes growth in order inflow in FY15 will depend on export market (which they are quite confident) and recovery in domestic market in H2FY15 (which they are hoping)."
"TMX aspires to become a US$2bn company over next 4‐5 years from US$1bn currently. The journey will largely be driven by increasing application of current product portfolio, increasing export foot print (plans to add $100mn from each of geography like Africa, South East Asia, Middle East and Rest of world). The current export base is ~$175mn( in FY13), it aspires to reach $500‐550mn in exports. Apart from growing current portfolio, the company is working on new product line in area of Air pollution, Water, Energy and defence which will also add significantly to growth in next few years. The Company has set a target for itself that 1/3rd of the revenues should come from new business areas."
"TMX's ability to bag base orders of ~Rs7‐8bn per quarter,stable market share and strong management pedigree gives us confidence that it will be able to manage the current slowdown and benefit fully from the upturn of the cycle and continue to surprise positively in terms of order flow. We believe TMX will continue to benefit from the demand supply gap in power sector and strong product portfolio with increasing traction in exports market. The stock is trading at 19x FY16E earnings. We continue to maintain 'Accumulate' on the stock. Given the better visibility in earnings through to FY16, we continue to rate the stock an accumulate," says Prabhudas Lilladher research report.
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