Thermax to benefit from China plus one, green hydrogen foray, says Jefferies

Jefferies said China plus one benefits have begun with boiler orders from global players whereas green hydrogen foray with an Australian firm that is working on an electrolyser facility, can be another growth avenue for Thermax.

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Jefferies has retained ‘buy’ rating on Thermax as the brokerage firm believes the company’s brand is well-placed to be a leader for India in terms of clean water, clear air and clean energy solutions.

“We believe over the next 12-24 months, capex growth should sustain backed by infrastructure spend, PLI linked incentive capex, industrial capex and housing recovery,” it said in a note to clients.

The brokerage firm said that China plus one benefits have begun with boiler orders from global players whereas green hydrogen foray with an Australian firm that is working on an electrolyser facility, is seen as another growth avenue for Thermax.

Multiple analysts see Thermax benefitting from the increasing demand for green energy solutions across sectors. The heavy electrical equipment maker’s order book remains strong at Rs 9,859 crore, up 33 percent YoY, as of December end 2022.

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Meanwhile, as revenues mirror the macro trends, margin outlook should sustain or improve and see the stock re-rate, Jefferies added.

It has maintained its EPS for FY23E-25 and target price of Rs 2,520, valuing the stock at 35 times Price to Earnings September 24 which is 17 percent discount to its seven year average.

After Jefferies’ bullish views on Thermax, the company’s stock rose around one percent on March 14. At 9:35 am, shares of the heavy electrical equipment maker were trading 0.4 percent higher at Rs 2,169 on the BSE.

The company’s share price has been on a declining trend in the past six months.

Thermax offers integrated solutions in the areas of energy and environment-heating, cooling, power, water and waste management, air pollution control and chemicals.