PAT miss on lower EBITDA margin and fall in other income
Thermax Ltd (TMX) reported robust revenue growth of 35% YoY, however PAT missed our expectations due to lower than expected EBIDTA margins and decrease in other income. Order inflow during 1QFY20 was a major disappointment with -27% YoY fall which was due to postponement of orders (due to elections) and weak investment sentiments in both domestic and international markets. Capacity utilization in most sectors is below optimal level, most companies are deferring capex plans. Going forward, management expects tendering to pick-up from 2Q/3Q FY20 onwards, mainly short cycle orders. Sectors which are expected to witness ordering are Cement, Steel, Water recycling, Chemical, Textile, Agro Pharma etc. The company received 1 FGD order in 1QFY20 and is L1 in couple of large orders which are expected to be received in FY20. On the international front, TMX sounded cautious due to weak investment sentiments and financial crunch. We expect TMX to report sales/PAT CAGR of 7%/15% over next two years (FY19-21E). The stock is currently trading at 32.6x/28.3x FY20E/21E. We maintain our Accumulate rating on the stock with TP of Rs1147 (30x FY21E).