On Monday, Thermax Ltd (TMX:IN) received a positive outlook from Jefferies, with the brokerage firm raising its price target on the shares to INR5,480.00 from INR4,445.00. The firm maintained a Buy rating on the stock, indicating a continued optimistic view on the company's prospects.
The upgrade comes after Thermax reported a fourth-quarter EBITDA that was 6% higher than Jefferies' expectations, with margins improving by 50 basis points to 9.9%. This performance was attributed to a 120 basis points margin expansion in the quarter, which notably did not include any one-off items that could skew the results.
Thermax's management has expressed confidence, noting that the enquiry pipeline has significantly increased compared to the start of the year. They anticipate that conversions of these enquiries into orders will materialize after the upcoming elections. The company has been focusing on strategic capital expenditure in areas such as captive power, water, and chemicals, which are expected to support future growth.
Looking forward, Jefferies introduced its FY27E projections and highlighted the potential for a 28% EPS compound annual growth rate (CAGR) from FY24 to FY27E. This growth trajectory is foreseen to drive further upside for the stock.
Additionally, the firm pointed to green hydrogen as a medium-term opportunity for Thermax, suggesting potential for the company in the evolving energy sector.
InvestingPro Insights
Thermax Ltd (THMX:IN) has demonstrated a sturdy financial position, as reflected by the company's ability to hold more cash than debt on its balance sheet. This indicator of financial health is a reassuring sign for investors, particularly in an economic climate where liquidity is a crucial factor for corporate resilience.
In addition to its solid balance sheet, Thermax has shown a commitment to shareholder returns, having raised its dividend for 3 consecutive years. This consistent increase in dividends is a testament to the company's stable cash flow and management's confidence in its financial future.
InvestingPro Data metrics for Thermax Ltd reveal that the company has maintained impressive gross profit margins, which have contributed to its strong performance. This margin strength is a key component of the company's ability to generate profits and sustain its growth trajectory as forecasted by Jefferies.
InvestingPro Tips for Thermax Ltd suggest that the company's stock is trading at a high earnings multiple, which could be indicative of market expectations for future earnings potential. This aligns with Jefferies' optimistic outlook and projections for substantial EPS growth in the coming years.
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