Thermax Limited (Thermax), incorporated in 1980, is a market leader in the small and medium-sized Industrial Boiler Segments in the country.
The company provides global solutions in Energy and Environment engineering, aided by a combination of technology and strategic alliances.
Though the company is currently facing the brunt of the slowdown and is likely to witness near-term challenges, the outlook seems to be considerably improving from FY2011 onwards.
Besides, the company’s entry into the utility boilers space would impart a greater revenue visibility, reducing the high cyclicality associated with its earnings.
Outlook and valuation
We believe that the company’s success in the utility boilers segment could be a key growth driver, driving a re-rating of the stock in the future.
At the current price of Rs455, the stock is quoting at 20.6x and 15.1x its FY2010E and FY2011E EPS, respectively.
We initiate coverage on the stock, with an ACCUMULATE recommendation and a target price of Rs512.