Whalesbook
Thermax Limited: Powering Future Growth
Shrikant Chouhan, head equity research at Kotak Securities, has issued a strong 'BUY' recommendation for Thermax Limited, citing significant growth potential and attractive valuations. The analyst highlights robust order inflows for Thermax in energy and environment solutions, pointing to promising investment opportunities in India's industrial sector.
Thermax Limited, a veteran in energy and environment solutions, is impressing with its order intake. In H1FY26, order intake was strong at around 1.3 times revenues, supported by momentum in Q3FY26. This suggests nearly 15% year-on-year growth in the order backlog, enhancing medium-term revenue visibility. Management reiterates guidance of approximately 20% YoY growth in order inflows for FY26. Demand is particularly robust across key sectors, including metals and mining, waste-to-energy power projects, and the food and beverages segment. The company continues to leverage its established businesses, pursue geographic expansion, and enter new adjacent markets. Verticals like waste-to-energy and water solutions have achieved significant scale, exceeding $100 million in size, and are gaining traction in both domestic and Middle Eastern markets. Further growth is anticipated from new capacity additions and expansion projects in the thermal power, cement, and steel sectors. Thermax is also strategically targeting new avenues such as data centers, offering comprehensive solutions for water, cooling, and environmental aspects, and exploring oil and gas opportunities in the Middle East.
Financial Outlook and Margin Improvement for Thermax
The margin outlook for Thermax appears constructive. This optimism stems from a reduction in the proportion of low-margin or problematic orders, a recovery in the previously underutilized chemicals business, and favorable mix improvements within its products segment. Approximately only 5% of the current order backlog is characterized by weak profitability, with limited risk of further downside. Legacy low-margin orders are nearing completion. Analysts forecast a 12% revenue CAGR for Thermax over FY25-28E, with stronger EBITDA and PAT CAGRs of approximately 19% and 16%, respectively, driven by modest margin expansion. Kotak Securities has assigned a 'Buy' rating with a fair value of ₹3,575, based on 40 times two-year forward earnings, with additional value attributed to its green energy and thermal projects.
JSW Cement: Dominating the GGBS Market and Expanding Footprint
JSW Cement is a significant player in India's cementitious products market, holding a commanding position as India's largest producer of Ground Granulated Blast-Furnace Slag (GGBS), estimated to command an 84% market share in FY2025. GGBS, a niche and high-growth product derived from slag, serves as an effective substitute for traditional cementitious materials in concrete. Demand for GGBS is projected to rise significantly with increasing awareness among decision-makers and certifying authorities regarding its benefits. JSW Cement is strategically positioned to expand this market, owing to its substantial share of GGBS in its overall product mix, superior profit margins, and a strong competitive advantage in sourcing slag. The company also benefits from the established reputation and brand strength of the broader JSW Group. A key structural advantage is its primary sourcing of slag, with approximately 90% of its requirements met by JSW Steel. The strategic location of JSW Cement plants near JSW Steel facilities significantly optimizes transportation costs, creating a cost barrier for competitors.
Expansion Plans and Projections for JSW Cement
Analysts foresee GGBS demand growing at a mid-double-digit rate from FY2025 to FY28E, fueled by cost advantages, low current penetration levels, and the product's favorable characteristics. The company is currently executing a comprehensive 4–5 year expansion program across India, employing a mix of greenfield and brownfield projects. JSW Cement is expected to add 6.3 million tonnes per annum (mtpa) of greenfield capacity in the northern region within the next two years, establishing its presence in four out of India's five major regions by FY2028E. Further expansion is planned by the end of the decade. JSW Cement has a proven track record, having delivered sector-leading CAGRs of 13% in capacity and 16.7% in sales over the past decade. Forecasts indicate volume and EBITDA CAGRs of 12% and 18% respectively over FY2024–28E, primarily driven by these upcoming capacity expansions. Kotak Securities has reiterated a 'BUY' rating on JSW Cement with a fair value of ₹135.
Impact
This analysis from Kotak Securities provides significant insights for investors in India's industrial and infrastructure sectors. The 'BUY' recommendations for Thermax and JSW Cement, coupled with strong growth forecasts, suggest potential stock appreciation and increased investor interest. The focus on sustainable solutions and specialized materials like GGBS aligns with broader economic trends, potentially boosting sector sentiment. This news is highly relevant for Indian stock market investors.
Impact Rating: 8/10
Difficult Terms Explained
- Order Intake: The value of new orders received by a company.
- Revenue Visibility: The predictability of a company's future revenue based on existing orders and contracts.
- Adjacencies: New business areas or markets that are closely related to a company's existing operations.
- GGBS (Ground Granulated Blast-Furnace Slag): A by-product of iron manufacturing, used as a supplementary cementitious material to improve concrete properties and reduce environmental impact.
- Slag: A glassy, granular material formed as a by-product of smelting iron ore.
- CAGR (Compound Annual Growth Rate): The mean annual growth rate of an investment over a specified period of time longer than one year.
- EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): A measure of a company's operating performance.
- PAT (Profit After Tax): The net profit of a company after all expenses, taxes, and interest have been deducted.
- Fair Value: An estimate of the intrinsic value of a stock or company, often used by analysts to determine if a stock is undervalued or overvalued.
- Resistance: A price level where a stock is expected to face selling pressure and struggle to move higher.
- Support: A price level where a stock is expected to find buying interest and stop falling.
- CMP (Current Market Price): The current trading price of a stock on an exchange.
- FY26, FY25, FY28E: Fiscal years. FY26 refers to the fiscal year ending March 2026. 'E' denotes estimates.
- YoY (Year-on-Year): A comparison of current period data with the same period in the previous year.
- mtpa (million tonnes per annum): Unit of measurement for capacity, often used in industries like cement and mining.
- Greenfield project: A new project built on undeveloped land, without any prior structures.
- Brownfield project: A project that involves developing or redeveloping an existing site or facility.
- FGD (Flue Gas Desulfurization): Technology used to remove sulfur dioxide from exhaust flue gases of fossil-fuel power plants, and from industrial processes.