Buy This Multibagger Engineering Stock As Shares Can Jump 19%, Recommends Sharekhan

Sharekhan has recommended investors to buy the stock of Thermax Ltd for a target price of Rs 2940 apiece with a potential surge of 18.93%. FY22 proved to be an inflection point for Thermax as its order backlog increased by 1.6x after a lull of almost 4 years.

The company's focus on energy and environment-friendly solutions and products led growth, which was supported by changing emission norms and growing demand for green-energy solutions the world over.

Thermax Ltd Stock Outlook

The current market price of the stock is Rs 2472 apiece on BSE with a marginal gain of 0.03% intraday. According to Sharekhan, if you buy the stock at its current market price, it has the potential to surge to Rs 2940 apiece with a potential gain of 18.93%.

Thermax Ltd Market Capitalization And 5 Years Return

The stock has a market capitalization of Rs 29,459 crore at the time of writing the story. The stock has given multibagger returns. In the last 5 years, the stock has given return of 176%, in 3 years it has given return of 148% and in last 1 year it has given a return of 76%.

Thermax Ltd Green energy - A key long-term growth catalyst

India eyes a renewable energy capacity of 500 GW (currently 101GW excluding large hydro capacities) by 2030 which entails ~40GW addition per annum till 2030. In addition, cement, steel, chemical and other heavy industries accounts for almost a quarter of India' greenhouse emissions which would be undertaking major capex plans towards increasing green energy power consumption by 2030. Thermax's stronghold in green energy in sectors such as metals, cement, chemicals, etc, places it in a strong position to grab the opportunity of rising green energy adoption in these industries over the coming decade.

Margin to improve led by better priced contracts

Thermax's project order book is largely fixed in nature, except two FGD orders, which have some variability. Thus, the spike in commodity prices inflation impacted Thermax's profitability in the last few quarters. However, as commodity prices have declined from their peaks recently, we expect Thermax's margin to improve going forward as projects with higher prices get executed.

Valuation - Retain Buy with a revised PT of Rs. 2,940

Thermax boasts of a healthy order book and has a promising enquiry pipeline for small ticket-size orders in cement, biomass, paper and pulp, and sugar distilleries and large orders from oil and gas, refinery, and petro chemicals. Thermax is expected to benefit from India's transition to gree n energy as it has many offerings in the space. International opportunities in biomass, waste heat recovery (WHR) and water desalination also remain strong. However, profit growth may remain lower than sales growth in the near term. In the long term, we believe margin improvement, exports growth, and increasing contribution from products as well as services business would aid profitability. Thermax currently trades at ~46x September 2024E EPS. Given the robust financials and ample business opportunities, we expect Thermax to trade at a premium.

About Thermax

Thermax is a leading conglomerate providing sustainable solutions in energy and environment. It has, over the years, developed significant expertise in the areas of waste heat recovery, waste to energy, green power and steam generation, air pollution abatement, process improvement chemicals, solar energy, water treatment and recycling.

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. 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.