Thermax

Thermax hit a new 52-week high yesterday at Rs.639.90. The stock shot up after it announced that it has secured an engineering, procurement and construction (EPC) order worth Rs.503 crore from a leading Government of India enterprise for setting up a captive power plant for its new 3 million tons per annum integrated steel plant in Central India. Thermax said it will design, engineer, construct and commission the project on a turnkey basis. This project is designed as a zero discharge plant and an effluent treatment plant based on reverse osmosis will recycle water. Including this order, Thermax now has contracted over 75 power projects on turnkey basis based on various fuels.

The company had posted better-than-expected numbers for Q2FY13. On net sales at Rs.1181 crore, which YoY was down 9%, it posted a net profit at Rs.91 crore, down 11%. EBITDA slipped 13% at Rs.122 crore. The company gets orders but the problem is that implementation due to slow down in the economy is not happening. What was worrying was the fact that the management set a very cautious tone during the analysts meet and said that the company had very few orders in captive power business and expected orders to start flowing only from H2FY13. Power sector orders remain a challenge and the company has concentrated on the EPC sector where the margins are lower. Unless capex spend does not increase, growth could remain range bound.