Thermax CEO Expects Strong Q4 On Revenue Recovery, Strong Orderbook

Energy and environment solutions company Thermax is confident of having a “very good” Q4 despite muted financial results for Q3, according to the company’s Managing Director and Chief Executive Officer Ashish Bhandari.

In an interview with NDTV Profit on Friday, Bhandari shared three reasons why he sees a strong recovery curve for his company.

The top executive mentioned that Thermax’s Q3 earnings did not reflect a “structural miss.”

“It was that there wasn't a structural miss, so to say, and I expect a very good Q4. I have got three reasons for that,” he said.

Thermax reported a 51% year-on-year drop in its third-quarter net profit at Rs 116 crore from Rs 238 crore a year ago, missing analysts’ estimates. Revenue grew 7.9% YoY to Rs 2,508 crore.

Thermax recovered from its revenue woes “pretty quickly” in January, the top executive revealed, stating the first reason for his stronger Q4 performance expectations.

“First, on the revenue side, we missed more than Rs 500 crore of revenue, which was relatively profitable—had more than 10% profitability, more than Rs 60 crores sitting out there that we could not shift in the last two weeks of the quarter. Variety of different reasons, but we did miss the bottom line. We recovered that in January pretty quickly, which showed it wasn't a structural shift,” he said.

Bhandari mentioned that Thermax’s project mix is the second reason why he is confident of recovery in Q4.

“Second on the project spread, which is where we have had a fair bit of pain through the year. Two of our projects went through their worst portions in this last quarter,” the top executive added.

“One particular FJD project had a lot of losses that got reconciled at the end. Bio CNG is a growth sector for us but with a lot of learning. A lot of that learning is over, but there may still be some pain. But that pain won't be as bad as what we went through last quarter,” he told NDTV Profit.

Thermax has also grown its orders by 40%, which will be another driver for stronger Q4 performance, according to the top executive.

“And finally, there are two parts to the order side. One is industrial products, which is a relatively profitable part of Thermax. There, we grew our orders by 40%. Overall, the backlog there has grown quite well,” the company’s MD said.

“The portion that is less profitable—the government projects, which are typically large—we didn't get anything in the last quarter. We were okay to not bid on less profitable projects and work the business towards a better margin profile long term. So we saw some of that impact,” he added.

However, Bhandari remained confident of seeing better opportunities in the government projects as well.

“But even there, I expect better times ahead because our pipeline of big projects now has also grown quite substantially,” Bhandari mentioned.

Shares of Thermax Ltd. went up by 2.89% to close at Rs 3,384.65 apiece on the NSE on Friday, while the benchmark Nifty 50 fell 0.18% to close at 23,559.95 points.