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Thermax targets China & hydrogen growth

14 Mar 2023

Thermax positioned for growth in China Plus One strategy and global hydrogen market

Thermax, the heavy electrical equipment maker, is well-positioned to be a leader for India in terms of clean water, clear air, and clean energy solutions, according to Jefferies, which has retained a 'buy' rating on the stock. The brokerage firm said that the benefits of China Plus One strategy have already begun, with boiler orders from global players, and the company's foray into green hydrogen with an Australian firm that is working on an electrolyser facility is seen as another growth avenue for Thermax.

As the demand for green energy solutions continues to increase across sectors, multiple analysts expect Thermax to benefit from the growing trend. The company's order book remains strong at Rs 9,859 crore, up 33% YoY as of December 2022, while its revenues mirror the macro trends. Jefferies added that the margin outlook should sustain or improve, and the stock should see a re-rate.

The global hydrogen market is also expected to provide a growth opportunity for Thermax. With its China Plus One strategy, the company can tap into the demand for renewable energy solutions in China, which is the world's largest energy consumer. In addition, the global hydrogen market is expected to grow significantly over the next decade, as governments worldwide aim to reduce carbon emissions and phase out fossil fuels.

Jefferies maintained its EPS for FY23E-25 and target price of Rs 2,520, valuing the stock at 35 times Price to Earnings September 24, which is a 17% discount to its seven-year average. Following Jefferies' bullish views on Thermax, the company's stock rose by around 1% on March 14. At 9:35 am, shares of the heavy electrical equipment maker were trading 0.4% higher at Rs 2,169 on the BSE.

In conclusion, Thermax is well-positioned to capitalize on the increasing demand for green energy solutions across sectors, thanks to its strong order book, brand, and China Plus One strategy. As the global hydrogen market continues to grow, the company's foray into green hydrogen is expected to be another growth avenue for Thermax, and the stock is expected to re-rate, according to Jefferies.

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