Thermax: Revise Upwards FY14E

Thermax: Revise Upwards FY14E Order Inflow, Margin

Our channel checks indicate Rs 10 bn boiler order expected from Tata Steel has been deferred to FY14. However, order booking of Rs 8 bn/quarter for small boilers and environment products along with large orders from NMDC, RIL, BPCL and export orders will maintain order inflow momentum in H2FY13. Thus, we believe Thermax (TMX) which saw inflows of Rs 28 bn in H1 is on track to achieve our FY13 order inflow estimate of Rs 55 bn (up 40% YoY).

Revise upwards FY14E order inflow by 11%: We revise upwards our FY14 order inflow estimate to Rs 75 bn from Rs 68 bn mainly to factor in order inflows from Tata Steel and IOCL along with higher exports (Rs 10 bn in FY14E vs. Rs 5 bn in FY13E). We expect Rs 30 bn orders for small boilers and environment products. Also, pipeline of large orders from Cement, Sugar and Pharma companies remains robust. Our checks indicate increasing demand for waste heat recovery systems from cement sector with a potential of 100-200 MW @Rs 90mn/MW. There could be additional upside to our order inflow estimate from supercritical boiler segment as TMX has bid for 5 GW of orders.

Stable margin: Reducing competition due to lower participation by Cethar (balance sheet stress) has led to stable pricing. Hence management expects to maintain margin at 10%. We raise our FY14E margin to 10% from 9.3%.

Improving free cash flow (FCF) on lower working capital cycle: Improving order inflow has resulted in higher advances, thereby lowering net working capital cycle. This will drive FCF generation of Rs 4-6 bn in FY13 and FY14 each.

Reiterate BUY with revised TP of Rs 720 (Rs 650 earlier): We revise our EPS for FY14 to Rs 40 (Rs 36 earlier) to factor in higher inflows and margin estimates. We reiterate BUY on increasing market share in captive power segment and improving FCF and RoCE. Our target price of Rs 720 is based on 18x FY14E.

Any Content material offence , contact me freely on kuberbshiva06@gmail.com.. this content rewrites or copied from Top level web-source - [ ],

Thank you

Prabhakar [ vampseo]

Indian SEO blogger