Thermax: Strong performance continues… - Views on News from Equitymaster

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Thermax: Strong performance continues…

Nov 12, 2002

Thermax Limited's September quarter numbers reiterate the company's comeback. It has posted a huge 48% rise in turnover during the quarter and seen an encouraging expansion in its operating margins. Higher tax provision has pruned bottomline growth to 24% YoY.

(Rs m) 2QFY02 2QFY03 Change 1HFY02 1HFY03 Change
Gross Sales (incl. Excise duty) 967 1,430 47.9% 1,803 2,444 35.5%
Other Income 121 49 -59.9% 175 110 -37.0%
Expenditure 976 1,336 36.9% 1,846 2,334 26.5%
Operating Profit (EBDIT) -9 94 - -43 109 -
Operating Profit Margin (%) -1.0% 6.6%   -2.4% 4.5%  
Interest 7 2 -78.9% 14 3 -76.2%
Depreciation 29 23 -20.9% 59 52 -11.5%
Profit before Tax 76 119 55.9% 60 165 175.5%
Tax -6 38 - -6 43 -
Extraordinary items -28 -15 - -28 -29 -
Profit after Tax/(Loss) 53 66 23.6% 37 93 152.0%
Net profit margin (%) 5.5% 4.6%   2.0% 3.8%  
No. of Shares 23.3 23.8   23.3 23.8  
Diluted Earnings per share* 9.0 11.1   3.1 7.8  
P/E Ratio   11.4     16.1  
*(annualised)            

As a result of the bouyant performance, Thermax ended the first half of FY03 with a 36% topline and a huge 152% bottomline growth YoY. With this, the company continues on its turnaround path. Thermax had posted a loss of Rs 132 m in FY01. FY02 was a better year for the company, where it earned Rs 240 m as net profit (helped by extraordinary income from sale of assets and businesses).

Segmental snapshot
% contribution to revenues 2QFY03 1HFY03 FY02
Energy 67.7% 69.3% 61.2%
Environment 32.3% 30.7% 38.8%
% contribution to PBIT      
Energy 68.4% 63.6% 49.0%
Environment 31.6% 36.4% 51.0%
PBIT earned per segment      
Energy 9.1% 6.9% 8.4%
Environment 8.8% 8.9% 13.8%

The company's order book position speaks volumes about the future growth prospects. The order backlog as on June 30, 2002 stood at Rs 2,060 m, 83% higher than the order backlog in the corresponding period last year. Based on this, the company has already indicated that it will finish FY03 with around 20% growth in topline (YoY).

Cost break-up
(Rs m) 2QFY02 2QFY03 Change 1HFY02 1HFY03 Change
Material costs 551 873 58.5% 1,026 1,515 47.6%
Staff costs 169 141 -16.8% 306 269 -12.1%
Other expenditure 256 321 25.7% 513 550 7.2%
Total expenditure 976 1,336 36.9% 1,846 2,334 26.5%

At the current price of Rs 126, the stock trades at 16.4x annualised 1HFY03 earnings. The company's second half of the year has traditionally been stronger than the first half. Assuming that the company earns the same net margins as FY02 (5.8% of net sales), then the valuations stand at 10.4x FY03E expected earnings.


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