Release Date: May 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Thermax Ltd (BOM:500411, Financial) has a strong pipeline for large orders, particularly in sectors like refining and petrochemicals.
- The company is seeing good traction in its new product lines such as Thermotron, FlexiSource, and MVR heat pumps.
- Thermax Ltd (BOM:500411) has made significant progress in its digital platform, EDGE Live, which is gaining traction across various products.
- The company has a robust order inquiry pipeline, especially in biofuel-related projects, which is expected to grow post-election and monsoon season.
- Thermax Ltd (BOM:500411) is optimistic about its chemicals business, expecting growth and expansion into new segments in the coming quarters.
Negative Points
- The order book for Thermax Ltd (BOM:500411) is softer than expected, missing internal targets, particularly in large orders.
- Bio-CNG projects have faced setbacks, particularly with rice-straw-based plants, leading to unexpected losses.
- Margins are being dragged down by low-margin FGD and sulfur recovery orders, which will continue to impact profitability.
- The company has faced challenges in its THVAC product line, particularly with truck applications, leading to slower-than-expected growth.
- Operational cash flow and free cash flow conversion were weak in FY24, partly due to investments in green energy projects.
Q & A Highlights
Q: There seems to be a slowdown in the order book. Is this election-driven, and do you expect a pickup post-election? Also, are you looking to participate in utility scale orders?
A: The order book is softer than expected, particularly in large orders. There is an election-related slowdown in sectors like sugar and steel. We are cautious about participating in large utility projects due to risk factors but are open to opportunities if the scope is clearly defined. (Ashish Bhandari, CEO)
Q: Given the current order book, can we expect top-line growth in the mid- to high-single digits next year?
A: We are aiming for more bullish scenarios, especially with green utilities and improved convertibility through the year. The start in Q1 and Q2 will be crucial. (Ashish Bhandari, CEO)
Q: What is the status of the thermal power tenders and the possibility of forming a consortium for large utility projects?
A: No tenders have come out yet that would qualify Thermax. Forming a consortium is an option, but it requires stable and capable partners. Breaking contracts into smaller scopes might be more beneficial. (Ashish Bhandari, CEO)
Q: How is the bio-CNG segment performing, and what are the challenges and opportunities?
A: We have faced setbacks with rice-straw-based projects, leading to losses. We are focusing on stabilizing current plants before taking new orders. The industry-wide challenges are being addressed, and we expect improvements. (Ashish Bhandari, CEO)
Q: Can you provide an update on the new products like Thermotron, FlexiSource, MVR, and heat pumps?
A: Thermotron and FlexiSource are performing well with a good pipeline. MVR and water-related products are also growing. However, THVAC has faced challenges, particularly with truck applications. We are optimistic about heat pumps and other new technologies. (Ashish Bhandari, CEO)
Q: What is the carrying value of old FGD and sulfur recovery orders, and how are they impacting margins?
A: We expect about INR600 crores of FGD revenues this year. These orders have been dilutive to margins, but we expect some improvement next year. (Rajendran Arunachalam, CFO)
Q: What are the growth opportunities in the water treatment and chemical business?
A: We see significant growth potential in water treatment, driven by projects like desalination and effluent treatment. The chemicals business is also expected to grow, with new segments being explored. (Ashish Bhandari, CEO)
Q: What are the CapEx plans for the next two to three years?
A: We do not share specific CapEx numbers, but investments will focus on green energy, chemicals, and industrial products. The largest portion will go towards green energy initiatives. (Ashish Bhandari, CEO)
Q: How do you view the future of the green solutions business on a BOO basis, and what are the expected IRRs?
A: TOESL has IRRs of 19-20%, while FEPL is currently loss-making but expected to break even in the next couple of years. We are optimistic about the long-term potential of these businesses. (Ashish Bhandari, CEO)
Q: What are the key technologies and sectors that will drive Thermax's growth by 2030?
A: Technologies like biofuels, hydrogen, and advanced water treatment will be crucial. The viability of these sectors depends on technology stabilization, policy support, and carbon pricing. (Ashish Bhandari, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
