Hold Thermax; target of Rs 3633: Prabhudas Lilladher

Prabhudas Lilladher's research report on Thermax

We visited Thermax’s Water & Waste Solutions plant in Pune and engaged with top management to discuss the financial and operational performance along with future growth and profitability outlook. The management remains optimistic with a minimum of ~10-11% revenue growth CAGR over the next five years with better margins supported by better execution in H2FY26. Company’s exposure to the USA tariffs remain below ~1% as the Chemical business is exempt. Emerging segments, including Green Hydrogen, Green Ammonia, and Sustainable Aviation Fuel (SAF), are expected to provide new avenues of growth for Industrial Infra and Industrial Products. Despite the slower than anticipated expansion of Chemicals business, it is expected to sustainably grow driven by company’s foray into specialty chemicals. The management aims to achieve 1 GW operational capacity in Green Solutions, post which may dilute its stake. Management remains risk averse with selective order booking (orders below Rs5.0bn) and focus on core capability building for long-term sustainable growth.

Outlook

Execution challenges will remain a key monitorable in the short term. However, in the long term, TMX is well placed to gain from increasing thrust on energy transition & de-carbonization led by its 1) sustainable green industrial solutions in bioenergy, heating & cooling, chemicals and water, 2) technical expertise, and 3) prudent working capital management. The stock is currently trading at PE of 50.6x/44.7x on FY26/27E. We maintain our ‘Hold’ rating valuing the core business at a PE of 40x Mar’27E (same as earlier) arriving at a SoTP-derived TP of Rs3,633 (same as earlier).

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Thermax - 12092025 - prabhu