The shares of Thermax Limited have been assigned a buy call rating by the brokerage firm Sharekhan. The stock was trading at a market price of Rs. 2,075 as of 3:30 p.m. IST on 14 January, and the brokerage anticipates the stock to reach a target price of Rs. 2,400 from its current market price. Thermax Limited is a mid-cap engineering sector company with a market cap of Rs 24,616.50 Cr, and the stock has given a decent return of 113.75 percent in a year. According to NSE, the stock hit a 52-week high of Rs 2,079.10 and a 52-week low of Rs 938.90 on 14 January 2022 and 27 January 2021, respectively.
Investment rationale for Thermax according to Sharekhan
- India's PM recently announced in climate conference India's target of achieving 500GW Renewable Energy capacity (currently 101GW excluding large hydro capacities) by 2030 which entails ~40GW addition per annum till 2030. Cement, Steel, Chemical and other heavy industries account for almost a quarter of India's greenhouse emissions which would be undertaking major CAPEX plans towards increasing green energy power consumption by 2030.
- Thermax has received on an average 70% of its order intake during FY2019-FY2021 from green energy offerings. The company's order book as of FY2021 is skewed towards key industries like Cement (14% share), Metals & Steel (10%) and Chemicals (10%) highlighting its strong positioning in offering green products & solutions to key industries. Hence, we expect it to receive strong order inflows related to green energy offerings to heavy industries over the current decade.
- Thermax won Rs. 546 crore to set up flue gas desulphurisation (FGD) systems for two units of 500 MW capacity from domestic power public sector company in January 2022. During November 2021 end, it had won Rs. 830 crore FGD orders for three units of 660MW from domestic power private sector companies. The large order wins highlights its competitiveness in cutting down emissions in power plants.
Buy With A Target Price of Rs. 2,400
Sharekhan has said in its research report that "Thermax is expected to benefit from India's transition to green energy setting up ambitious targets for 2030 in the renewable energy space. The company's enquiries pipeline remains positive for small ticket-size orders in waste heat recovery in cement and steel apart from large orders from oil and gas, FGD, and chemical. The international opportunities in Biomass, WHR, water desalination remain strong. Further, it has a strong balance sheet with a healthy cash position which provides investment avenues in new energy technologies like hydrogen. The stock is currently trading at a PE of 31x its FY2024E EPS. We maintain our Buy rating with a revised price target of Rs. 2,400 led by upwardly revised estimates."
The above stock has been picked from the brokerage report of Sharekhan Ltd. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.