ICICI Securities Recommends Buy This Multibagger Midcap Engineering Stock, Sees Robust Gains

ICICI Securities has recently published a report on Thermax Limited, where it has given a 'buy' rating to the stock of the company for a target price of Rs 2,480 apiece. Considering the brokerage's given target price, if investors buy the stock at the Current Market Price they can expect a gain of 22% in 12 months. This is a mid-cap engineering sector company with a market capitalization of Rs 24,313.25 crore.

Stock Outlook

TCNS Clothing Ltd's stock's Current Market Price is Rs 577.65 apiece after gaining 1.89%. Its 52-week low was recorded at Rs 494.10 apiece on June 20, 2022, and 52 weeks high was recorded at Rs 932 apiece on November 17, 2021, respectively. Its debt to equity ratio is 0. It is a small cap stock with a market capitalization of Rs 3,560 crore.

In terms of returns, the stock has gained 7.44% in the last 1 week, and 15.62% in the last 1 month, respectively. However, the stock has not performed well in long run. In the last 1 year, it has given a negative return of 0.49% and in the last 3 years, it has given a negative return of 25.44%, respectively. Since its listing, its share price has fallen 12.36%.

Order pipeline moderates, but remains stable

We believe Thermax Ltd is a key beneficiary of the government's increasing thrust on clean energy and decarbonisation initiatives, as well as visibility on private capex. Company's strengths are in its technical expertise, strong balance sheet and prudent working capital management. Order inflow continues to be strong as seen from the 97% / 22% YoY growth in FY22 / H1FY23, led by both base and large orders from inter alia refinery, steel, cement and FGD sectors. However, going ahead, with enquiry pipeline plateauing in the large-order space (mainly from refineries), growth is likely to be driven by base orders from steel, sponge iron, cement (waste heat recovery), biomass energy, and sugar industries among others. We believe, with increasing share of the base business, execution momentum is likely to sustain. We expect a revenue CAGR of 19% over FY22- FY25E. EBITDA margin for H1FY23 stood at 6.3%, which we believe is likely to gradually improve on the back of: 1) higher execution, 2) lower commodity prices, and 3) easing of supply-chain challenges. Increased focus on the spares & services business is likely to help further improvement in margins. Current orderbook stands at a robust Rs95bn (1.3x TTM sales). We upgrade our rating to BUY (from Add), due to the recent correction in the stock price, while we maintain our target price of Rs2,480 (implied P/E 45x FY25E).

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.