Thermax Standalone Q1FY10 Results – At CMP of Rs454, the stock is trading at 18.8X FY10E and 16.1X FY11E consolidated earnings of Rs24.2 and Rs28.3 per share respectively. We have a reduce rating on the stock.

Thermax has reported disappointing numbers for Q1FY10, well below our estimates.

Revenues decreased 25% yoy to Rs5,376 mn, against our estimate of 5.3% decline, led by decline both Energy & Environment segments. Energy segment declined 23.4% yoy to Rs4,194 mn while Environment segment decreased 29.9% yoy to Rs1,252 mn – below estimates.

Operating margins dropped 210 bps yoy to 12.8%, against our estimate of 80 bps yoy decline – attributed to 210 bps yoy drop in Energy segment margins to 12.4%. Environment segment margins improved marginally to 11.9%.

Led by decrease in revenues and drop in operating margins, operating profits decreased 35.6% yoy to Rs689 mn, below estimates.

Despite dismal operational performance adjusted net profit decreased only 27% yoy to Rs456 mn – below estimates, due to higher other income. Thermax reported other income of Rs103 mn in Q1FY10 as against forex loss (net of other income) of Rs57 mn in Q1FY09.

At the consolidated level, revenues decreased 26% yoy to Rs5,687 mn and net profits decreased 26% yoy to Rs471 mn – below estimates

The only silver lining in the current quarter result was order accretion – Thermax' consolidated order book increased 21% yoy to Rs34.26 bn (up 9% qoq). This implies incremental order accretion of Rs8.57 bn – down 12% yoy but 19.3% of order inflows expected in FY10E.

At CMP of Rs454, the stock is trading at 18.8X FY10E and 16.1X FY11E consolidated earnings of Rs24.2 and Rs28.3 per share respectively. We have a reduce rating on the stock.