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Thermax - Result highlights.

Thermax’ Q3FY2009 results were below expectations on revenue front, however owing to better-than-expected operating performance and lower tax the adjusted net profit came in line with estimate.

The stand-alone total income from operations reported a decline of 6% to Rs795.1 crore. Revenue from energy division continued to be disappointing as it declined by 9% to Rs628.3 crore, while the revenue from environment division grew by a decent 14.1% year on year (yoy) to Rs185.3 crore.

During the quarter the company provided for marked-to-market (MTM) losses of Rs10.6 crore as against a net gain of Rs2.4 crore in Q3FY2008. Adjusting for the same the operating profit of the company rose by 2.35% to Rs107.4 crore. The operating profit margin (OPM) improved by 110 basis points yoy to 13.5% on account of decline in raw material cost as percentage of sales by 510 basis points yoy to 65.6%.

The adjusted net profit of the company was up 8% to Rs79.3 crore.Accounting for extra-ordinaries, the reported profit declined by 3.6% yoy to Rs72.3 crore.
On consolidated front, Thermax’ total income stood at Rs2,447.1 crore for the nine-month period, almost flat on year-on-year (y-o-y) comparison and declining marginally by 0.7%, while the reported profit after tax was Rs183.5 crore against Rs.207.8 crore in the same period of the last year.

The current order book of the company stands at Rs4,103 crore as against Rs4,500 crore at the end of the previous quarter. Going forward, revenue from the energy division is likely to pick up, as orders bagged in the previous few quarters are likely to get executed.

At current levels, the stock is trading at 5.8x its FY2009E earnings and 5.5x its FY2010E earnings, which make it pretty attractive. Thermax continues to be a strong player in boiler segment, while its strong balance sheet, handsome dividend yield and high return ratios combined with its excellent track record further raises our confidence in the company.Buy the stock with a target of Rs287 (10x FY2010E earnings).