Thermax has won an order for the supply and commissioning of boilers and turbines, and balance of plant equipment (ash handling system, water treatment plant, pollution control systems etc).

The order is for a captive power plant for a green field integrated steel plant complex in Andhra Pradesh and is valued at Rs450 crore.

The order inflows in the recent past have been encouraging for the energy division of the company, particularly the captive generation space, as the space has been witnessing slower order inflows, a cause for concern for the company.

We believe the recent order win will further allay the concern for order inflows. With this the total order backlog (last announced plus all the acknowledged orders since then) of the energy division would stand at around Rs4,023 crore, which would be 1.4x the division’s FY08 revenues.

In the past one month the stock price of Thermax has corrected by over 18%. We believe the steep correction in the price is unwarranted and the stock price adequately captures the concerns.

The current valuation at 12x and 9.8x FY09E and FY10E earnings per share respectively provides an attractive investment point in the stock given the increased visibility of the earnings of the company for FY10 and beyond. We recommend a BUY on the stock with a price target of Rs564.