In the past six years, the company’s operations have grown from Rs6.8 billion to Rs35 billion. Thermax’s products are focused on waste to energy and efficient heating techniques.

As much as 70% of the company’s revenues are derived from projects while the rest are from products and services. The company has exports across the globe and recently opened manufacturing operations into China.

Its products cater to a broad range of industries including steel, cement, refineries, sugar, textiles, fertilizers etc. In line with the buoyant investment trends in steel, cement and refineries, these three sectors contribute bulk of the orders.

Order inflows from the steel and sponge iron sector continue to be strong. Management expects to end the year with a healthy order backlog and make inroads into export markets.

Valuation

We have raised our revenue forecast for FY10 by 6%. EBITDA growth for FY10 has also been revised upwards by 10%. Ultimately, net profit is higher by 10% as compared to our previous recommendation.

At the current price, the stock is trading at 17.9x and 14.0x FY09 and FY10 earnings respectively. Near-term growth is expected to be subdued. In view of this, current valuations do not provide much room for upside.

We raise target price to Rs540 based on DCF but downgrade the stock to ACCUMULATE from Buy earlier, mainly in view of limited upside to our target price.