15 July 2015
Update | Sector: Capital Goods
Thermax
BSE Sensex
28,198
S&P CNX
8,524
CMP: INR1,038
TP: INR1,275 (22%)
Buy
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Strategic
‘Reorientation’
Highlighting the broad contours of the journey
TMX has seeded multiple growth levers over the last few years, with several of
these initiatives already witnessing initial traction:
Investments in product development are yielding new growth avenues, with
~15-18 new product lines commercialized in the last few years (aims to
generate 30% revenues from innovations in the last five years).
Indian power BTG ordering is now picking up, with TMX-Babcock JV receiving
initial overseas orders (including an order for a supercritical boiler).
Focus on selective Internationalization by i) setting up manufacturing hub in
Indonesia (for ASEAN region, end-FY17), ii) overseas EPC capabilities (Africa).
Gradual pick-up in large capex segments like cement, hydrocarbons,
fertilizers and nuclear power will be an important medium-term driver.
Expect 43% earnings CAGR in the next five years, strong ‘mid-cycle’ play
During the last cycle, TMX revenues increased ~9x from INR7b in FY03 to
INR60b in FY12. The
Strategic ‘Reorientation’
now provides robust
foundation to capitalize on the next leg of the growth.
Over the next five years, we expect revenues to increase ~2.5x (from INR53b
in FY15 to INR130b) and margins to expand from 8.7% in FY15 to 13.5-14% in
FY20, driven by traction in i) large-sized projects, ii) internationalization, iii)
Power BTG JV; this should drive 25% CAGR stock returns. TMX remains a very
strong ‘mid-cycle’ play on revival in the domestic investment climate.
We have cut FY16/17 EPS by 3.5-4% to factor in the near-term headwinds to
investment climate; maintain
Buy
with target price of INR1,275/sh.
Exhibit 1: Managing transition into the Big league, in the next economic upcycle
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)/(USD b)
TMX IN
119.2
1,315/790
5/-2/4
124.4/2.0
Financial Snapshot (INR Billion)
Y/E Mar
2015 2016E 2017E
Net Sales
53.4
59.7
67.6
EBITDA
Adj PAT
EPS (INR)
4.6
2.6
21.8
5.4
3.5
29.0
33.2
195.0
14.9
18.4
36.0
5.4
6.8
4.6
38.4
32.4
216.6
17.7
21.8
27.2
4.8
EPS Gr. (%)
-6.0
BV/Sh.
179.3
( )
RoE (%)
12.1
RoCE (%)
P/E (X)
P/BV (X)
16.3
44.1
5.4
TBW has received the initial
order for a super critical boiler
(from Vietnam). Expect BTG
awards of 18-20GW in FY16.
Setting up ASEAN manufacturing
hub in Indonesia (to be
commissioned by FY17); building
EPC capabilities (received orders
of 165MW in FY15 from Africa).
Gradual pick-up in segments like
cement, fertilizers, oil and gas,
metals, etc will be a key driver.
Expect 4-5 Fertilizer plants to be
awarded in FY16.
Commercialized 15-18 new
products in last 4 years. Aims
to generate 30% of revenues
from products launched in last
5 years.
Satyam Agarwal
(AgarwalS@MotilalOswal.com); +91 22 3982 5410
Amit Shah
(Amit.Shah@MotilalOswal.com);+91 22 3029 5126
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

Thermax
Seeding
‘Multiple’
Growth Levers
Several initiatives have already witnessed initial traction
TMX has seeded multiple growth levers over the last few years, with several of these
initiatives already witnessing initial traction.
Investments in product development are yielding new growth avenues, with ~15-18
new product lines commercialized in the last few years (the company aims to generate
30% of the revenues from innovations of the last five years). The company’s CEO was
honored with ‘Asia Innovator Award’ in 2012 for having innovation at the core of his
organization.
TMX-Babcock JV (TBW) has received initial orders from overseas markets, including
the first order for a supercritical boiler— an important milestone. Overall, the Indian
power BTG segment is picking up and ~18-20GW project awards are expected in FY16.
Focus on selective Internationalization by i) setting up manufacturing facilities in
Indonesia, ii) building EPC capabilities (with initial successes in Africa). TMX has
already acquired land for setting up the manufacturing plant and aims for a
meaningful traction in the ASEAN region (planned capex of USD25m; to be operational
by end-FY17).
Service/Chemicals businesses now contribute 14-15% of revenues, and drivers are
linked to
opex
instead of
capex,
thus providing revenue stability. New manufacturing
facilities for resin exports and building material chemicals are being set up at Dahej
and Coimbatore (cumulative capex of INR2.4b), and will be commissioned by end-
FY17.
Gradual pick-up in large capex segments like cement, hydrocarbons, fertilizers and
nuclear power over the medium term will be an important driver for TMX.
R&D Expenses (INR M)
Culture of innovation: Targeting 30% revenue contribution from
new product launches of the last five years
The investments in product development are yielding new growth avenues, with
~15-18 new product lines commercialized in the last few years. Even during FY15,
four new products were commercialized—including smaller capacity CFBC boiler,
heat transformer, compact Sewage treatment plant and solar energy-based boilers
(that can be integrated with operating boilers). TMX also partnered for setting up a
3MW solar-biomass hybrid plant at Bihar (with funding from European Union)
besides achieving selective commercialization of the fuel cell development program
(with an initial order from Indian defense).
Several of these products
are targeted at mid-sized
industries, commercial
establishments, etc and
thus provide a more stable
and scalable business model
Several of these products are targeted at mid-sized industries, commercial
establishments, etc. and thus provide a more stable and scalable business model.
Most of these products are ‘Standard’ in nature (catalogue-based products with
minimum design customization) and thus provide scalability. These products entail
better margins, given the innovation involved in creating an
‘application’
segment,
and leverage the existing marketing and sales network.
Going forward, the company is eying 30% revenue contribution from the products
launched in the past five years; the contribution stood at ~17-18% as of mid-FY14.
The company also aims to maintain the share of contribution from ‘Standard’
products even when the project revenues pick up.
15 July 2015
2

Thermax
Asia Innovator Award for
having innovation at the
core of the organization
TMX MD and CEO MS Unnikrishnan was honored with the
'Asia Innovator Award'
at
the 11th CNBC Asia Business Leaders Awards in 2012. The citation notes that he was
awarded "for
his inventive thinking in business and his leadership in an organization
that has innovation at its core".
Exhibit 1: Key new product launches/commercialized over the last four years
FY12
Triple Effect Absorption Chiller – 25% more efficient vs double effect technology
Lambion Grate – Biomass based power plants
Solar-Biomass Hybrid Cold storage pilot project for rural applications
Hybrid Chiller – For Process applications
Combloc
- Smaller capacity CFBC boiler (1.5-6TPH) with multi-solid fuel capabilities
Dry Coolers – For areas with water scarcity
Aquaerotherm
- Solid fuel fired hot air generator
Performance Chemicals (Building Materials)
Air Cooled Pusher Grate – Converts Municipal Waste to Reuse Derived Fuel
Solar Biomass Hybrid (Pilot Project for 0.25MW)
Guard Bed Resin Tulsion ASD057
Biomethanation of canteen waste to replace LPG in canteens
Containerized Water treatment and Purification plants for Process applications
Thermeon
– Smaller capacity steam boilers (0.3-1.5TPH)
Heat Transformer - Enhances energy efficiency
BioCask - Compact sewage treatment plant which can be fitted in basements
Solar Boiler - can be integrated with other operating boilers
Solar-Biomass Hybrid (3MW) – Partnering for a pilot project, funding from European Union
Fuel-cell development program reached selective commercialization with order from Defence
Source: MOSL, Company
FY13
FY14
FY15
Highlights of new product innovations
TMX introduced a
solid fuel and biomass fired packaged boiler
ComBloc in the
1.5–6 ton range for medium-sized customers. The product offered the flexibility
to switch between a wide variety of solid fuels depending on availability and
cost. The company also launched a new product ‘Thermeon’ in the 0.3-1.5TPH
range; a fully packaged boiler, its installation time is shorter and doesn’t involve
the hassles of civil work.
The
triple effect absorption chiller
reduces energy consumption by 25%. One
such chiller was initially installed at TMX facility in Chinchwad to demonstrate
energy-efficient air conditioning for multiple locations from a central source.
Containerized
water treatment and purification plant
are ideal for hot, humid
and dusty industrial sites. The containers save customers the complexity and
hassles of constructing buildings to house such systems. This model is useful for
remote locations, oil fields, power and chemical industries, mining and
construction sites.
15 July 2015
3

Thermax
Domestic intake largely
from Standard products
(INR b)
Domestic
RIL Order
Our View:
Currently, ‘Standard’ products catering to mid-sized industries like Food
Processing, Pharma, Chemicals, Engineering, Paper, Tyres and Distilleries contribute
INR5-6b/quarter to order intake and the trends have been fairly stable. With
increased applications (led by innovation in segments such as solar hybrid, waste
water and sewage treatment, small-sized boilers, cooling applications, and
municipal waste management), we expect the contribution to increase meaningfully
in next few years. Several of these products are at the core of various government
initiatives, viz. Smart City Development (INR500b in five years), Namami Ganga (river
cleaning project) and Renewables (TMX positioning in hybrid integration and
distributed generation), and thus benefit from government directives toward strict
adherence to environmental regulations (air/water pollution norms, etc), promoting
energy efficiency, etc.
Power BTG JV (Boiler) receives initial orders, including one for a
660MW supercritical project
In FY15, Thermax Babcock & Wilcox (TBW)—a 51% joint venture between TMX and
Babcock & Wilcox—commissioned a utility boilers manufacturing facility ( annual
capacity of 3GW; can be expanded to 5GW) at Shirwal, 50kms from Pune in
Maharashtra. The initial project cost stands at INR7.7b, with DER of 50:50. The
facility can manufacture both supercritical and subcritical boilers.
Exhibit 2: Manufacturing facility of TBW JV at Pune
Source: MOSL, Company
Bags first supercritical project: An important milestone in the
learning curve
to make a winning bid
During FY15, TBW received
orders of ~INR6.5b from
overseas
During 2HFY15, TBW won two contracts for engineering and core pressure part
manufacturing: (i) Two 350MW (INR3.4b) boilers for the Dominican Republic, (ii)
one 660MW (INR2.7b) supercritical boiler for Vietnam. The JV has also received
an order for two biomass-fired boilers from B&W Volund, Denmark.
We believe that winning the supercritical project (from Vietnam) is an important
milestone in terms of the learning curve associated with execution and making a
successful bid in the domestic market.
4
15 July 2015

Thermax
In an important development, Babcock & Wilcox Ltd., USA—the joint venture
partner—was demerged into two listed companies at the NY Stock Exchange in
FY15. The power generation business has been spun off as a new public company
Babcock & Wilcox Enterprises. The demerged company will retain the entire boiler
portfolio apart from the construction, waste-to-energy, and services businesses. We
believe this focused entity will greatly help the business prospects of the Indian JV.
TBW is an important part of
global competitiveness for
powergen portfolio of the
Babcock and Wilcox group
Exhibit 3: Power Gen Order wins by Babcock and Wilcox; expect several projects to be sub-
contracted to the Indian JV
Date
Project
Jul-14
Two sub-critical coal fired boilers
Jul-14
Biomass Power plant
Dec-14
Waste-to-Energy Power plant
Jan-15
Supercritical Coal-Fired Boiler and SCR system
Jan-15
Biomass Power plant
Mar-15
Biomass Power plant
Mar-15
Emission control project
Shaded areas indicate projects awarded to TBW, Indian JV
USD M
na
80
230
na
200
220
40.3
Country
Dominican Republic
Denmark
Scotland
Vietnam
Wales
England
Colorado
Source: MOSL, Company
Expect pick-up in Indian BTG project awards, led by NTPC/state genco
projects
BTG award pipeline is showing signs of strong recovery in FY16, with ~18-20GW
of supercritical projects likely to be awarded during the year compared with
average supercritical project awards of 4-5GW in FY14/FY15. This could be a
tipping point, particularly for the equipment manufacturers, given that industry
capacity for supercritical boilers and turbines stands at ~21-24GW pa.
We believe that ~30GW+ of projects will be possibly awarded over the next 24
months.
The market is witnessing a shift from EPC contracts to package awards. For
instance, NTPC recently awarded the Katwa 1320MW project on package basis,
with BHEL emerging as L1 in boilers and Bharat Forge-Alstom in turbines. The
shift is favorable for players like TBW.
15 July 2015
5

Thermax
Exhibit 4: Approximately 30GW+ of projects likely to be awarded over the next 24 months
Project
Tuticorin
Barethi
Ramagundem
Bhusawal
Udangudi
Katwa
Pudimadaka
Ghatampur
Hardauganj Extension
Maitree Project
Krishnapatnam, Vijayawada,
Kothugundem
Talcher Expansion
Lakhisarai
Pirpainty
Gorakhpur
Chandrapur
Koradi
Latur
Panipat Thermal (Unit 9)
Orba Extension
Potential Pipeline
Owner
NTPC
NTPC
Mahagenco
TN Genco
NTPC
NTPC
Neyveli
UPRUVNL
NTPC-Bangladesh
Andhra Pradesh
NTPC
Bihar State (26%) - NTPC (74%)
Bihar State (26%) - NHPC(74%)
Nuclear Power
Mahagenco
Mahagenco
Mahagenco
Haryana
UPRUVNL
Sector
Private
Central
Central
State
State
Central
Central
Central
State
Central
State
Central
Central
Central
Central
State
State
State
State
State
Capacity
(MW)
525
2,640
1,600
660
1,320
1,320
4,000
1,980
660
1,320
2,400
1,320
1,320
1,320
1,400
Nuclear
1,320
1,980
1,320
660/800
600
~30,000+
Source: MOSL, Company
Comments
BHEL L1
BHEL L1
BHEL / BF-
Alstom L1
BHEL L1
Our View:
Winning the supercritical project (from Vietnam) is an important
milestone in terms of the learning curve associated with execution and making a
successful bid in the domestic market. Indian BTG market is now picking up, with
project awards likely at 18-20GW in FY16. Also, the market is moving from EPC
projects to package awards; this opens up interesting possibilities for TBW.
Manufacturing capacity of 3GW can possibly translate into peak revenues of
~INR40b (v/s reported FY15 consolidated revenues of INR53b); thus, any traction in
domestic project wins will be a key monitorable and an important stock price
trigger.
TBW JV has a huge operating leverage; expect this to be a meaningful contributor to earnings growth for
TMX in the medium term
Exhibit 5: Revenue potential (INR b)—assume capacity
utilization at 45% in FY20…
Revenues
Capacity Utilization (%)
31.3%
8.8% 11.3%
18.8%
45.0%
Exhibit 6: …leading to strong earnings growth, given the low
PAT break-even volumes at ~500MW (<20% utilization)
PAT
Source: MOSL, Company
Source: MOSL, Company
15 July 2015
6

Thermax
Selective internationalization: An important focus area
Overseas intake (Standalone,
INR M) up meaningfully
Overseas
The exports strategy is undergoing reorientation through
increased localization by
setting up subsidiaries in overseas markets (particularly
in Southeast Asia and
Africa). As part of this strategy, the company plans to progressively localize more
facets of its value chain in these markets. Overseas contributed 27% of the
consolidated revenues in FY15 (up marginally from 26% in FY13) and the medium-
term target is to increase the contribution to 40%.
Increased localization is important for the next leg of growth to expand operations
in terms of product size, consolidate EPC capabilities and possibly expand service
revenues. Increased localization will also enable the company to shorten the
delivery time and focus on cost optimization. The company had appointed a Global
Consultancy Organization to work on a localization program in select countries. The
strategy has already witnessed initial traction, with significant order wins in
Southeast Asia and Africa in FY15.
Product business:
i) In Southeast Asia, the attempt is to localize a part of
operations in Indonesia, Malaysia, Thailand and Philippines by setting up
subsidiary companies; ii) in Africa, offices have been opened and are now being
converted into subsidiaries; the export strategy from India will continue in the
interim; iii) in the Middle East, the strategy is to export from India as the market
opportunities are largely centered around hydrocarbons.
Projects business:
Earlier, the strategy was to export out of India and supervise
the construction from India. However, the strategy has been reoriented and
now key manufactured products are exported from India, but purchase of
bought-out items (e.g., pumps and motors) and supervision of the construction
is done locally. The initial success in terms of few EPC contracts in Africa has
been encouraging.
FOB Exports (INR M)
FOB Exports
Manufacturing facility in Indonesia to be commissioned in FY17; the
company targets a meaningful traction in the ASEAN region
To enhance presence in
Southeast Asia,
a wholly owned subsidiary Thermax
Engineering Singapore Pte Ltd was incorporated in May 2014 in Singapore, through
which operating subsidiaries are being set up Malaysia, Thailand and the Philippines;
an operating subsidiary was set up in Indonesia in Oct 2014. The company has
already procured land in Indonesia to construct a regional manufacturing hub to
cater to the ASEAN markets, and it should be operational by end-FY17 (Capex
USD25m).
15 July 2015
7

Thermax
Exhibit 7: Architect’s impression of TMX’s manufacturing facility in Indonesia: Envisaged as
a regional manufacturing hub for ASEAN
Source: Company
Project business is an important driver; to be supported by increased
localization
Post the initial success in EPC projects in the overseas market, TMX is now
expanding presence—both in terms of the size and complexity of the business. In
FY15, TMX won its biggest EPC order overseas when it received contract from
Dangote Industries, Africa to supply two captive power plants with a cumulative
capacity of 165MW.
Southeast Asia and Africa are the key locations where the company is expanding the
operations for larger-sized of boilers, heaters, EPC, etc; we understand that this is an
important agenda for the localization plan. Project work needs contact points;
hence, with the establishment of offices in countries such as Kenya, Nigeria and
Egypt, the intake should increase.
Exhibit 8: EPC contracts an important driver post the initial success
Company
Lamson Inc
Bataan 2020
National Cement Company
Yemen Co Sugar Refining
Dangote Industries
Austcane Energy
Lamson Inc
Dangote Industries
Dangote Industries
Country
Philippines
Philippines
Yemen
Yemen
Zambia
Australia
Philippines
Tanzania
Nigeria
MW
3.5
13
28
14
30
22
15
75
90
Industry
Corn Starch
Paper
Cement
Sugar
Cement
Sugar
IPP (Biomass based)
CPP
CPP
Source: MOSL, Company
15 July 2015
8

Thermax
Exhibit 9: Captive power plant of 30MW under execution by TMX in Zambia
Source: Company
Service Revenues (INR M)
Services
% of Sales
Service and chemicals businesses: Provide stability as revenues
linked to ‘opex’
Increased contribution of the service and chemicals businesses (14% of revenues in
FY15) acts as a balancing mechanism, given that the business driver here is ‘opex’
instead of ‘capex’.
Contribution of
the service business
has increased from just 2.9% in FY11 to
8.2% in FY15, and is an important growth driver. Plant improvements, fuel shift
retrofits and energy enhancement projects have contributed to the increased
contribution. Power plant management (O&M) business also continues to
report healthy growth, and the company has over 34 assets as part of the
portfolio.
Resins and chemicals
business reported revenues of INR2.7b in FY15 (up 7.3%
YoY); decline in oil field chemicals business—given the sharp fall in crude
prices—impacted revenues. During FY14, the construction chemicals business
was launched. TMX now has four portfolios: (i) Ion-exchange resins, (ii)
performance chemicals (iii) paper chemicals, and (iv) construction chemicals.
Our View:
TMX has outlined a meaningful capex plan to expand the chemicals
business: i) Procured land at Dahej to set up an export-oriented manufacturing
facility (to be operational by mid FY17) at a capex of INR1.5b, ii) setting up a building
materials chemicals plant at Coimbatore at a capex of INR600m. With plans to
increase internationalization of the business and expand the product base, the
growth prospects look strong in the medium term.
FY11 FY12 FY13 FY14 FY15
Chemicals Business (INR M)
15 July 2015
9

Thermax
Strongly positioned for the
‘Upcycle’
Expect 43% earnings CAGR in the next five years
Over the next five years, expect revenues to increase ~2.5x/margins to expand
~60%
During the last cycle, TMX revenues increased ~9x—from INR7b in FY03 to
INR60b in FY12. The
Strategic ‘Reorientation’
of the business portfolios now
provides a robust foundation to capitalize on the next leg of growth.
Over the next five years, we expect consolidated revenues to increase ~2.5x
(from INR53b in FY15 to INR130b) and margins to expand from 8.7% in FY15 to
13.5-14% in FY20. The revenue expansion will be supported by i) pick-up in large
capex segments like cement, hydrocarbons and fertilizers, ii) increased
localization in overseas markets driving exports/overseas revenues, iii) strong
traction in power BTG JV. Margin expansion will be supported by i) operating
leverage, given that consolidated gross margins stand at 42% and reported
EBIDTA margins at 8.7% in FY15; ii) increased contribution of power BTG JV
(better fixed-cost absorption).
Initial progress and traction has been encouraging: i) Power BTG award pipeline
is showing signs of pick-up (expect pipeline at 18-20GW in FY16) and TMX has
won its first supercritical order; ii) five fertilizer projects are likely to be awarded
in FY16; iii) overseas EPC business has witnessed traction—given the recent
165MW project wins in Africa, iv) the company has started work to set up the
ASEAN manufacturing hub in Indonesia at a capex of USD25m (to be completed
by end-FY17), v) 15-18 new products have been commercialized in the past few
years.
Possibility of 43% earnings CAGR till FY20
Exhibit 10: Expect Consolidated revenues to grow 2.5x in the
next five years (INR B)…
Exhibit 11: …and EBIDTA margins to increase 60% (from 8.7%
in FY15), given the operating leverage
Source: MOSL, Company
Source: MOSL, Company
15 July 2015
10

Thermax
While contribution margins
have been stable, staff
costs/other expenses have
impacted reported margins
Exhibit 12: Poor operating leverage has impacted TMX (Standalone) EBITDA margins; gross
margins have remained range-bound
FY09
FY10
Contribution margins have been stable
Raw Material
65.4%
66.7%
Contribution Margins
34.6%
33.3%
EBIDTA volatility led by poor operating leverage
Staff Costs
7.9%
9.5%
Other Expenses
15.4%
14.6%
Add: Operating Income
1.6%
2.3%
EBIDTA
12.9%
11.6%
FY11
71.3%
28.7%
7.7%
11.1%
1.3%
11.2%
FY12
70.2%
29.8%
7.4%
12.1%
1.1%
11.5%
FY13
68.5%
31.5%
FY14
65.2%
34.8%
FY15
65.5%
34.5%
8.7%
10.0%
9.7%
13.1%
16.6%
15.8%
1.3%
1.4%
1.1%
10.9%
9.6%
10.1%
Source: MOSL, Company
Shareholding pattern (%)
Mar-15 Dec-14
Promoter 62.0
DII
FII
Others
7.7
15.7
14.7
62.0
7.9
15.3
14.8
Maintain Buy; core portfolio holding
Mar-14
62.0
6.8
16.6
14.6
FII includes depository receipts
Strong commitment to the core ‘Strategy’ and the journey till date has improved the
investor perception about ‘sustainable superior performance’ and hence premium
valuations. Maintain Buy with a 12-month price target of INR1,275 (30x FY17E at
INR1,117/sh and INR141/sh for subsidiaries). We marginally cut our earnings
estimates by 3.5-4% for FY16-17 to factor in the constrained investment climate in
the near term. Premium valuations are supported by: i) Expectations of strong 43%
earnings CAGR over the next five years, ii) robust FY15 RoCE at 16.3% (in a
downcycle), iii) FY15 net working capital at just eight days (reflecting the bargaining
power of the business) and net cash at INR6.2b (up from INR4.2b in FY14).
Stock Performance (1-year)
1,400
1,200
1,000
800
600
Thermax
Sensex - Rebased
Well prepared to capitalize on domestic and global recovery
TMX has created capacities both in terms of manufacturing and manpower, and
is thus prepared to capitalize on the recovery in the investment climate. We
understand that the current capacity utilization in standalone business stands at
80%; excluding the increased levels of in-sourcing, it stands at 65% (as in an
upturn, parts of the manufacturing can be outsourced).
Key factories commissioned in the last few years include chemicals (FY12, at
Jhagadia), air pollution control (FY13, at Solapur) and TMX-Babcock (TBW)
supercritical boiler capacity (~3GW, at Shirwal). TMX has also set up ~0.25msf of
office space as ‘Energy House’ and ‘Environment House’ to house the various
businesses; these modern offices will strengthen the company’s positioning as a
knowledge-driven company. The company is currently working on a capex
program of ~INR4b, comprising manufacturing facility in Indonesia and
chemicals business in India.
Danstoker acquired a boiler manufacturing facility in Denmark on a slump sale
basis; the acquisition was financed by the retained earnings of Danstoker and
the facility is 150kms away from the existing manufacturing plant. In the existing
plant, the capacity utilization was running at optimum levels and land was an
important constraint. Fabrication work has already commenced at the new
facility.
15 July 2015
11

Thermax
Exhibit 13: RoEs impacted, given the underutilization of
fixed assets
Gross Fixed Assets + CWIP (INR M)
33 38
14 17 16
22
29
28
ROE (%)
Exhibit 14: Consolidated net cash at comfortable levels
(INR m)
Consolidated Net Cash/ (debt)
24
24
18
17 13
12 15
Source: MOSL, Company
Source: MOSL, Company
TMX has used the current downcycle to prepare for the next upcycle
Thermax is one of the few examples of a product-driven engineering company from
India and has acquired/absorbed various technologies over the current downcycle
(FY10-15). Many of these tie-up agreements also provide opportunities to
completely indigenize the technology and access to overseas markets.
Exhibit 15: TMX: Key technology tie-ups, also provide access to new geographies
Balcke-Durr GmbH
Georgia-Pacific
Chemicals
GE Water, USA
Wehrle Umwelt GmbH
SPX, USA
Babcock and Wilcox
Lambion Energy
Solutions
Amonix Inc
Rifox (Acquisition)
Danstoker (Acquisition)
Siemens
Electrostatic Precipitators
Chemicals
Water and Waste Water
Treatment
Water and Waste Water
Treatment
Electrostatic Precipitators
Supercritical Boilers
Biomass combustion
Concentrated Photovoltaic
Technology
Steam Traps
Heating
HRSGs
ESPs for industries and power plants up to 300MW; overseas markets that TMX
would focus on include Southeast Asia, Middle East and Africa
Performance-enhancing chemicals in the paper industry
Ultra-filtration and membrane bio-reactor technology for waste water treatment
for commercial and industrial use and distribution of GEs reverse osmosis
membranes
Hard-to-treat industrial biological and chemical oxygen effluents to address
pharma and bulk drug manufacturers, dyes and pigments, chemicals
JV, with TMX holding 51%, for ESPs for power plants >300MW
Supercritical boilers for 300MW+ range
Biomass combustion; TMX will have exclusive license to market heating systems
in India and SAARC countries, Southeast Asia, the Middle East and Africa
Amonix will offer solar power generation systems and TMX will be the EPC
partner
Steam traps and allied steam accessories manufacturer; will enable heating and
cooling business to extend portfolio in Europe, SoutheastAsia and the Middle East
Packaged boiler business, including from biomass and waste heat recovery
boilers; enable the company to introduce products in Europe
Registered with Siemens as its global supporting vendor
Source: Company, MOSL
15 July 2015
12

Thermax
Exhibit 16: Thermax: Key operating metrics
INR m
Standalone Order intake
Energy
- Power EPC
- Energy Ex Power EPC
Environment
Order intake (% YoY)
Energy
- Power EPC
- Energy Ex Power EPC
Environment
Standalone Revenues
Domestic (excl Power EPC)
Domestic (Power EPC)
Exports (Excl Deemed)
% YoY
Domestic (excl Power EPC)
Domestic (Power EPC)
Exports
EBIT Margin (%)
Energy
Environment
EPS Composition (INR/Sh)
Standalone
TMX-Babcock JV
Other Subsidiaries
Consolidated
Balance Sheet Details - Standalone
Core Net Working Capital (Days)
Net Working Capital (Days)
Net Cash / (Debt) INR M
RoE (%) Consolidated
FY11
53,180
41,736
15,300
26,436
11,444
-8.3%
-10.0%
-28.5%
5.8%
-1.2%
50,235
25,350
14,225
10,660
54.5%
25.9%
144.0%
62.5%
11.8
10.0
12.6
FY12
40,300
28,830
5,169
23,661
11,470
-24.2%
-30.9%
-66.2%
-10.5%
0.2%
54,360
29,073
13,857
11,430
8.2%
14.7%
-2.6%
7.2%
11.1
10.7
12.4
FY13
48,580
36,550
15,020
21,530
12,030
20.5%
26.8%
190.6%
-9.0%
4.9%
47,693
29,202
8,652
9,839
-12.3%
0.4%
-37.6%
-13.9%
11.0
10.4
10.5
FY14
53,940
46,010
2,800
43,210
7,930
11.0%
25.9%
-81.4%
100.7%
-34.1%
43,022
25,150
6,862
11,010
-9.8%
-13.9%
-20.7%
11.9%
9.7
11.3
5.8
FY15
39,510
29,560
6,720
22,840
9,950
-26.8%
-35.8%
140.0%
-47.1%
25.5%
46,974
32,141
3,913
10,920
9.2%
27.8%
-43.0%
-0.8%
10.1
10.7
8.3
FY16E
46,849
34,909
6,500
28,409
11,940
18.6%
18.1%
-3.3%
24.4%
20.0%
46,749
26,073
9,021
11,655
-0.5%
-18.9%
130.5%
6.7%
10.7
11.0
9.5
FY17E
60,784
47,338
10,000
37,338
13,446
29.7%
35.6%
53.8%
31.4%
12.6%
52,639
31,871
7,365
13,403
12.6%
22.2%
-18%
15.0%
11.0
11.5
10.5
32.1
0.0
-0.1
32.0
34.1
-0.8
0.5
33.9
29.4
-1.3
-1.2
26.9
23.7
-2.3
1.8
23.1
28.2
-5.3
-1.2
21.8
30.5
-3.8
2.2
29.0
37.2
-1.8
2.9
38.4
42.1
-11.9
6,910
28.4
27.8
6.6
6,050
24.2
31.8
18.5
6,206
16.8
57.8
12.8
7,643
13.3
40.5
12.0
9,736
12.1
41.1
35.6
9.3
-8.0
10,959
14,247
14.9
17.7
Source: Company, MOSL
15 July 2015
13

Thermax
Financials and valuations
Income Statement
Y/E March
Total Revenues
Change (%)
Raw Materials
Staff Cost
Other Expenses
EBITDA
% of Total Revenues
Depreciation
Other Income
Interest
PBT
Tax
Rate (%)
Adjusted PAT
EO Income (net)
Reported PAT
Change (%)
2011
52,472
60.3
34,803
4,547
8,266
5,669
10.8
541
652
45
5,736
1,965
34.3
3,818
0
3,818
169.0
2012
60,313
14.9
38,435
5,578
10,795
5,919
9.8
663
830
122
5,964
2,043
34.3
4,034
0
4,034
5.7
2013
54,331
-9.9
33,157
6,123
10,736
4,982
9.2
771
769
165
4,814
1,773
36.8
3,202
0
3,202
-20.6
2014
50,283
-7.4
28,616
7,019
10,991
4,381
8.7
922
716
274
3,901
1,696
43.5
2,758
0
2,468
-22.9
2015
53,396
6.2
31,377
7,057
10,886
4,635
8.7
1,341
1,209
820
3,683
1,711
46.5
2,592
-494
2,098
-15.0
2016E
59,714
11.8
32,575
7,637
14,707
5,359
9.0
1,287
1,274
615
4,730
1,708
36.1
3,453
0
3,453
64.6
(INR Million)
2017E
67,583
13.2
36,620
9,028
15,799
6,754
10.0
1,361
1,442
600
6,235
1,863
29.9
4,574
0
4,574
32.4
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Deferred Tax Liability
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Curr. Assets
Inventory
Debtors
Cash & Bank Balance
Loans & Advances
Other Assets
Current Liab. & Prov.
Creditors
Other Liabilities
Provisions
Net Current Assets
Application of Funds
E: MOSL Estimates
2011
238
12,911
13,448
1,480
299
15,448
10,678
2,825
7,853
354
2,415
30,370
3,657
10,209
6,880
4,015
5,610
2012
238
16,055
16,671
2,704
378
20,491
11,929
3,488
8,441
2,466
2,395
33,427
3,666
13,707
6,983
3,560
5,512
2013
238
18,449
19,070
4,210
383
24,382
12,962
4,236
8,726
5,175
4,430
31,544
3,240
15,468
3,211
4,125
5,501
2014
238
20,145
20,701
7,387
318
29,484
20,441
5,183
15,258
537
7,079
36,540
4,158
14,685
4,508
4,270
8,919
2015
238
21,226
21,360
5,534
-104
27,675
20,510
6,198
14,312
429
8,217
35,221
3,413
16,730
3,494
4,820
6,764
2016E
238
23,102
23,236
5,442
-104
29,027
22,039
7,485
14,554
400
8,217
37,657
2,986
14,929
2,418
5,382
11,943
(INR Million)
2017E
238
25,668
25,802
5,442
-104
31,393
24,539
8,846
15,693
400
8,217
43,778
3,379
14,192
6,994
5,697
13,517
8,928
3,184
2,782
4,825
15,448
9,690
5,323
2,721
7,190
20,491
9,723
5,275
2,812
6,051
24,382
9,319
6,815
2,668
6,603
29,477
9,492
7,040
3,200
4,716
27,674
11,943
7,453
3,574
5,857
29,027
13,517
8,398
4,039
7,083
31,393
15 July 2015
14

Thermax
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation (x)
P/E
Cash P/E
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors. (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
2011
32.0
36.6
112.9
9.0
32.6
2012
33.9
39.4
139.9
7.0
24.0
2013
26.9
33.3
160.0
7.0
30.5
2014
23.1
30.9
173.7
6.0
33.9
27.0
20.2
16.0
1.4
3.6
1.0
28.4
37.4
71
25
62
3.4
0.1
24.2
29.7
83
22
59
2.9
0.2
16.8
20.4
104
22
65
2.2
0.2
13.3
14.2
107
30
68
1.7
0.4
2015
21.8
33.0
179.3
7.0
47.9
44.1
29.1
23.3
2.0
5.4
0.7
12.1
16.3
114
23
65
1.9
0.3
2016E
29.0
39.8
195.0
11.0
45.7
36.0
26.2
22.2
2.0
5.4
1.1
14.9
18.4
91
18
73
2.1
0.2
2017E
38.4
49.8
216.6
14.0
43.9
27.2
21.0
17.0
1.7
4.8
1.3
17.7
21.8
77
18
73
2.2
0.2
Cash Flow Statement
Y/E March
PBT before EO Items
Add : Depreciation
Interest
Less : Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
EO Income
CF from Oper. Incl. EO Items
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from Investments
(Inc)/Dec in Net Worth
(Inc)/Dec in Debt
Less : Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2011
5,736
541
45
1,965
(3,329)
1,028
0
1,028
(3,265)
-2,237
1,289
-1,976
466
1,401
45
695
1,127
178
6,702
6,880
2012
5,964
663
122
2,043
(2,262)
2,442
0
2,442
(3,361)
-919
20
-3,342
1,145
1,224
122
1,246
1,001
102
6,880
6,982
2013
4,814
771
165
1,773
(2,633)
1,345
0
1,345
(3,765)
-2,420
(2,035)
-5,800
320
1,506
165
976
684
(3,771)
6,983
3,211
2014
3,901
922
274
1,696
745
4,146
0
4,146
(2,816)
1,330
(2,649)
-5,464
547
3,178
274
836
2,615
1,297
3,211
4,508
2015
3,683
1,341
820
1,711
873
5,006
-494
4,512
(436)
4,076
(1,138)
-1,426
12
-4,297
820
1,004
(6,108)
(3,022)
4,508
3,494
2016E
4,730
1,287
615
1,708
(2,217)
2,707
0
2,707
(1,663)
1,044
0
-1,500
0
-92
615
1,577
(2,284)
(1,077)
3,494
2,417
(INR Million)
2017E
6,235
1,361
600
1,863
3,350
9,684
0
9,684
(2,535)
7,149
0
-2,500
0
0
600
2,008
(2,608)
4,576
2,418
6,994
15 July 2015
15

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