Whalesbook
New ₹1600 Crore Order Wins Praise, But Stock Dips
Thermax Ltd. announced its subsidiary, Thermax Babcock & Wilcox Energy Solutions Ltd. (TBWES), secured a ₹1,600 crore order for a boiler package. The order is for a 1x800 MW ultra-supercritical thermal power plant in central India. This win follows a strong third quarter where net profit rose 80% year-on-year to ₹205 crore. EBITDA margins also improved to 9.7% from 7.5% a year ago. Revenue saw modest growth, and order bookings increased 34% year-on-year. However, Thermax shares declined in the last trading session and are down over the past year, indicating a disconnect between its operational performance and market valuation.
Thermax Faces High Valuation Amidst Sector Boom
Thermax's valuation currently stands at a Price-to-Earnings (P/E) ratio of roughly 54-59 times as of March 2026. This is a significant premium compared to rivals like Larsen & Toubro (L&T), which trades at a P/E of 25-34x. BHEL's P/E is notably higher, often over 100x. The capital goods sector is experiencing a strong upswing, driven by government spending and initiatives like 'China+1'. This positive environment supports order inflows, as Thermax's booking growth shows. However, the sector is cyclical, meaning stock prices often depend on large contract execution. Thermax's stock previously reacted well to strong results, such as a surge after Q4 earnings in May 2024, contrasting with its current muted response.
Analysts Divided on Thermax's Future
Analyst views on Thermax are mixed. Kotak Institutional Equities upgraded the stock to 'Buy' in December 2025 with a target of ₹3,575, expecting fast growth and margin gains. Conversely, Motilal Oswal maintained a 'Sell' rating in February 2025, citing lower-than-expected revenue bookings, cost overruns on projects like FGD (Flue Gas Desulfurization), and pressure on margins. The consensus price target is around ₹3,395, with significant divergence from ₹2,700 to ₹4,900. Key concerns for the bear case include Thermax's high valuation potentially pricing in unrealistic growth, execution risks on large projects due to potential cost overruns, and competitive pressures from players like L&T and BHEL. While Thermax targets profitable orders, contract lumpiness can cause volatility.
Sector Strength Supports Thermax Outlook
Looking ahead, analysts project Thermax's earnings to grow around 17.4% annually, with revenue increasing by 12.6% per year. The broader capital goods sector is expected to continue its positive trend due to sustained government spending and industrial recovery. Thermax's strong order book and expertise in supplying boiler packages for ultra-supercritical plants align with ongoing investments in thermal power capacity, which remains vital for India's energy supply. While the average analyst price target indicates modest upside, the wide range of targets highlights existing market uncertainties.