Robust order book, but no surprises from Thermax

Robust order book, but no surprises from Thermax

Energy and environmental solutions provider Thermax Ltd.’s March quarter results produced no surprises, with net sales growing 62.9% quarter-on-quarter and 28.6% year-on-year (yoy) to 1,219.3 crore. Operating profit grew 9% YoY to 146.6 crore. But the sequential growth was higher at 64%, given the faster pace of project execution. Revenue from the environment segment grew by 71%, while that of the energy segment grew by 18% YoY.

About six months ago, Thermax had settled a long-running dispute with US-based Purolite Inc. It had written off Rs114.9 crore for this payment in the quarter as an “extraordinary item”. As a result, the company has reported a net loss of around Rs15.7 crore. On the operations front alone, Thermax posted a marginal 7% increase in net profit to around Rs99 crore.

As the business for Thermax had increased especially in the last quarter of fiscal 2010, the company’s annual turnover remained flat at Rs3,370 crore. The net profit of Rs256.3 crore was also marginally lower than the previous fiscal.

However, fiscal 2010 saw a robust order book build-up to Rs5,300 crore, compared to Rs2,900 crore a year ago. The shares have been rising steadily over the last few months on positive news, including the company’s entry into high-end utility boilers. It has also announced a joint venture with Babcock and Wilcox Co. for manufacturing supercritical boilers, which are larger in size and have future growth potential in the power sector.

Thermax shares fell 2% on Tuesday to close at Rs666. Analysts estimate that fiscal 2011 will see a 25% growth in revenues, with earnings per share of around Rs25. This implies a discount of 27 times, leaving little room for appreciation from current levels.

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