Thursday, April 9, 2009

Thermax Ltd.: Good Investment

The financial performance of Thermax for the third quarter ended 31st Dec 2008, on a QoQ has been better than its performance when compared on a YoY. Q3 net sales QoQ was down marginally by 1.12% at Rs.795.06 crore while it was down 6% YoY. The company managed to show a lower operating expense despite a forex loss of Rs.10.60 crore. Net profit for the quarter, on a QoQ was up 27% at Rs.72.30 crore, which on a YoY was down 4%.

Net profit YoY might have come down but the profit margins have been better. NPM was at 9.09% as against 8.87% in Q3FY08.

It has an order book of Rs. 4,103 crore as of December 31, 2008. The company has stated that given the prevailing economic conditions coupled with the credit squeeze, many industries are reviewing their capital expenditure plans. Orders would come in but yet, the order execution, due to the slowdown and the liquidity scenario might get staggered or even cancelled. The company expects execution of orders slowing down and in Q4 it does not expect the situation to be any different from what it was in Q3.

Despite the flat or slowdown in growth predicted by the company, Thermax is a good investment on three counts – firstly its orders to the power sector will not get unduly affected as power remains a priority sector for growth. Secondly, it is a zero debt company, a rare breed to come across in today’s time and thirdly, with inflation down, its costs would come down further, which in turn would help maintain the bottomlines.

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