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Thermax Ltd (updated - 23 July 2009)
Engineering firm Thermax’s numbers for the June quarter have been somewhat disappointing, but then the management had anticipated the slowdown in expenditure on capital goods right at the start of the year. The 25 per cent fall in revenues in the June quarter is the result of both sluggish order flow and slow execution of projects. Orders took their time to flow — they fell 25 per cent sequentially in the March 2009 quarter; some customers were cancelling orders while others were renegotiating contracts because of the tight liquidity position that they found themselves in. Moreover, the management was always cautious about taking on projects that might result in bad debts and receivables.

However, the good news is that things are looking up and approximately Rs 1,000 crore order inflows during the June 2009 quarter have shown a sharp sequential increase. A fair share of these orders have come from the captive power segment, both domestic and overseas.

As a result, at the end of June 2009, the consolidated order backlog was close to Rs 3,500 crore, higher by about 20 per cent compared with in June 2008. With the pick-up in orders, the Punebased firm, which makes a variety of equipment, including boilers, should be back on track in another quarter or so.

The drop in revenues resulted in fall in the operating profit margins of about 200 basis points to just under 13 per cent in the June quarter. For the current year, Thermax is expected to turn in revenues of close to Rs 3,000 crore, a fall from the previous year, while net profit is estimated around Rs 285 crore. The Thermax stock has gained 126 per cent since April this year compared with a rise of 50 per cent for the Sensex. At the current price of Rs 429, the stock trades at just under 18 times 2009-10 estimated earnings.
source - BS

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Thermax Ltd (updated - 26 May 2009)
The management of Thermax had seen the slowdown in spends on capital goods coming and was gearing up to meet the challenges even late last year. It’s clear orders are taking their time flow in —they fell 25 per cent sequentially in the March 2009 quarter with some customers cancelling orders and others wanting to renegotiate contracts. It appears that another two quarters could pass before things are back on track at the Pune-headquartered firm that makes a range of equipment including boilers.

The management was always clear that it wasn’t going to chase orders and would make sure it managed to collect payments on time and that’s what it continues to do. Despite the fact that revenues have been sluggish—growing just under 2 per cent for 2008-09 and 3 per cent for March 2009 quarter— profitability has actually improved. The operating margin improved somewhat – up 25 basis points year-on-year to 14 per cent in the March 2009 quarter mainly because the company was able to cut costs and also reap the benefits of lower prices of inputs.

However, Thermax believes that it will be tough to maintain margins at these levels since prices of raw materials could go up in the second half of the year.

While exports, which bring in a fourth of consolidated revenues, grew at arobust 35 per cent in 2008-09, poor demand in its key markets of West Asia, Africa and South East Asia will mean that Thermax’s revenues are going to depend pretty much on the home market. It’s hoping to see more orders from power, metal and cement companies later this year. Nevertheless analysts are pencilling in earnings of Rs 26 for 2010-11, which works out to 14 times earnings.
source - BS

Thermax Ltd (updated - 19 Sept 2009)
The Thermax stock rose 6per cent on Friday, after the capital goods firm bagged a Rs 1,000 crore turnkey contract for a270 Mw power plant to be set up in Andhra Pradesh. While it may not be the most profitable of orders, given that some part of the equipment and services will be outsourced, it’s nonetheless a breakthrough for the company in the power utilities space.

Moreover, it comes on the back of a Rs 400 crore win announced a couple of weeks earlier. In fact, the approximate value of business which the Punebased company won during the June 2009 quarter was Rs 1,000 crore.

At the end of June, the consolidated order backlog was close to Rs 3,500 crore, which was higher by about 20 per cent than in June 2008. With the latest win, the order book now looks even more robust and the management recently indicated that prospects for business from the cement and environment sectors were looking up, too.

In the June quarter, a fair share of business came in from the captive power segment - both in the domestic and the overseas markets.The March quarter of course, saw poor order flow because throughout the past year, the management has been careful to take on only those projects that would not result in bad debts and receivables. Thermax’s numbers for the June 2009 quarter were disappointing, with revenues down 25 per cent year-on-year.

Despite the flurry of orders and speedier execution, revenues in the current year are likely to be subdued at around Rs 3,000 crore, a fall over the previous year’s Rs 3,458 crore.

Even after the trend in revenues reverses, the operating profit margins, which came off by about 200 basis points to just under 13 per cent in the June quarter, could remain at these levels. That’s mainly because competitive pressures have resulted in the business becoming somewhat less profitable.

Net profits this year are estimated to be around Rs 285 crore, lower than last year’s Rs 350 crore but should bounce back in 2010-11. The Thermax stock has gained 207 per cent since April this year compared with a rise of 65 per cent for the Sensex. At the current price of Rs 555, the stock trades at 17 times 2010-11 estimated earnings.
source - BS