Shares of Thermax Ltd. experienced their steepest decline since April 2025 on Friday, sinking by 16% following the announcement of what analysts described as an "extremely weak" first-quarter performance. The company's Q1 results fell significantly short of market expectations across key metrics including revenue, EBITDA, and net profit, primarily due to substantial cost overruns.
Q1 Performance Misses Projections
The energy and environment engineering firm reported a significant drop in profitability, with its EBITDA margin plummeting to 3% compared to 10.4% in the same period last year. This sharp contraction was largely attributed to an increase in the estimated completion costs for a legacy project within its industrial infrastructure segment. Even after adjusting for these specific costs, the industrial infrastructure margins stood at a mere 2.5%, well below the 4% estimated by MOFSL and 7.9% recorded last year.
Furthermore, the company's net profit (PAT) saw a drastic 86% year-on-year decline, settling at Rs 21.80 crore against an estimated Rs 110 crore. This underperformance was exacerbated by lower exports in the industrial products segment during the quarter. The Q1 results did include a Rs 56 crore income under the Package Scheme of Incentives for a subsidiary in the industrial infrastructure division, but this was insufficient to offset the broader financial pressures.
Analyst Reactions and Outlook
Following the disappointing earnings report, brokerage firm JM Financial issued a 'Sell' recommendation on Thermax stock, setting a target price of Rs 3,075. Conversely, UBS maintained its 'Buy' rating with a higher target of Rs 5,600, indicating a divergence in analyst sentiment regarding the company's long-term prospects despite the immediate setbacks.
Order inflow for the quarter stood at Rs 2,809 crore, marking a 2% year-on-year increase. However, this figure significantly missed JM Financial's estimate of Rs 4,100 crore, even with the inclusion of a substantial Rs 400 crore-plus data center order secured from the US market.
Investor Call and Future Concerns
Thermax has scheduled an investor call for 11 am IST today to discuss the Q1 results and provide further insights. Management had previously highlighted potential execution pressures in international markets, particularly the Middle East, in the wake of ongoing regional conflicts. Analysts from JM Financial emphasized that commentary on order executions, especially within the industrial infrastructure segment, along with outlooks on commodity price pressures and future order inflows, would be crucial variables to monitor during the call.