Thermax Q4FY21 Concall Summary

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Business Updates

  • The month of May has been extremely difficult to navigate but all plants have been operational even though at reduced capacities
  • Over the last quarter segments like cement, steel and petrochemical have led to a good order book but for the whole year the order book remains quite broad based


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  • From a sales growth perspective FY22 will also depend upon execution which is dependent on covid restrictions as well
  • Currently unsure on how demand will come back but in the last year demand came back very strongly after the first wave of covid had subsided
  • The management expects some big orders that will come up on table for discussion over the next couple of quarters but that remains a hope as of now because it is in the future 
  • There will be an impact of higher commodity prices in Q1 of FY22 and it has been visible in the last quarter as well
  • The commodity risk is for a very limited period of time because it takes that much time for the company to finalize the project and procure the material. For the government projects it is usually 2-3 months
  • It is difficult to judge for the management on the quantum/run rate of the order book on a quarterly basis
  • There is a slowdown in orders from Tier2-3 cities witnessed in the current months
  • There is some activity in FGD’s and between Q3&4 there should be 4-5 projects that should be finalized and it remained to be seen whether the company can win any projects in this
  • The government oil & gas companies have come back strongly to complete the projects that they had in refining & petrochemical segment
  • There is a slowdown in the refinery segment and many of the big companies wont be adding capacities to the levels as would have been thought of 3-5 years ago
  • The BOT orders have been taken on the balance sheet of a wholly owned subsidiary of Thermax and all these projects are long term contracts of over 10 years and it has performed very well 
  • With change in nature of the industries over the years the business that the company used to get earlier from industries have changed considerably over the last decade and it will continue to change so many of the works that earlier used to come as orders no longer do
  • In the cement industry most plants in India have already installed a waste heat recovery plant and the penetration is currently very good. However in South East Asia this still remains at a low level so international demand should be quite good
  • The management would want to keep the margins at the level where they are currently
  • Currently the company revenue is divided is roughly between 50% on projects and 50% on services
  • The company works with the government but stays away from directly dealing with municipalities
  • In the whole area of hydrogen fuel cells the management does not see commercialization in the next 12-24 months and there needs to be work done to develop the ecosystem
  • On the solar front there are rapid changes happening on the technology side and many segments are opening up and in one of these the management has partnered with someone to bring about a product over the next 18 months
  • It is too early to make a call on whether the performance of the subsidiaries have turned for the better because of many problems due to covid still existing
  • In the chemicals business water chemicals business has decent profitability and the highest profitability is in specialty resins
  • Over a 2-3 year period specialty chemical division of the company will grow at a high rate
  • The company is actively looking at M&A opportunities in chemical space but with many good companies the valuations are too high and with some other candidates there is no technological advancements that the management sees by bringing them within Thermax
  • The whole industry has very efficient players and it is not that capability differentiates the company against its peers but in challenging scenarios the company turns out to be a better service provider than many of its peers to its customers
  • On an investment viewpoint the company has spent lesser than many of its MNC counterparts over the past few years
Also Read on FinMedium:  Concall Summary: SRF Q4FY20

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Karan Sharma

Karan Sharma

The Concall Summary Guy | CFA | Investor
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