The Hindu Business Line : Thermax delivers Q1 nos in line with expectations

During the quarter, the company (standalone) reported 13.7 per cent increase in net profits backed by a 7.6 per cent growth in revenues. The order book at the end of the quarter stood at Rs 2,649 crore, up from the Rs 2,435 crore at the beginning of the year.

On a consolidated basis, the total income increased by over 8 per cent and operating margins expanded by about 50 basis points to 11.2 per cent.

Despite that, earnings growth remained muted due to the pre-operative expenses of Rs 5.5 crore incurred for a newly commissioned China facility. The group’s net profit stood at Rs 58.4 crore (Rs 55.6 crore).

Segmental break-up

On a consolidated basis, the energy segment contributed about 76 per cent of the total revenues (85 per cent), while the environment segment made up for the rest.

The environment division delivered better growth. The division’s revenues grew by about 56 per cent as compared with the same quarter last year, while the energy division saw a 3 per cent dip in revenues.

Lower carry forward orders in this segment at the beginning of the year provided indications of this.

The change in business mix helped improve profit margins, as a higher bias towards projects helped contain the raw material cost.

The group’s operating profit margins expanded by 50 basis points to 11.2 per cent.

Outlook

The company has recently bagged an order worth Rs 820 crore in the utility boilers space.

The boilers (4*240 MW) will be manufactured by Thermax under its technology licence agreement with Babcock and Wilcox and will be executable in the next 30 months.

Notably, this order has a price variation clause attached with it and hence may enable passing on of input costs, protecting margins.

However, a significant majority of the company’s orders are fixed price contracts.

That the management has already procured raw material supplies for most of its orders may help insulate its margins from any further hike in input prices.

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