Thermax reported a mixed Q3 FY26, with the Chemicals segment experiencing significant profitability contraction due to new asset costs and volume issues. Industrial Products' margins were also lower than last year. However, the company saw strong international order inflows, including key data center wins, and expressed bullishness for Q4 revenue and order book growth. Management is actively addressing problematic projects and is optimistic about future growth avenues like carbon capture and Green Solutions.
vs Q4 FY26
| Metric | Value | YoY |
|---|---|---|
| FY26 YTD Revenue Growth | 1% | — |
Segment Breakdown
Inflow this qtr
₹ 1,400 crores
Execution
Dangote project delivery is about 18 months
Composition
Pipeline
deal pipeline tcvIndustrial Infra pipeline continues to be good; Power (supercritical, subcritical, captive) pipeline is reasonably big, highest in 2-3 years.
Cancellations / Deferrals
"Management is bullish on orders for the year, with strong international contributions and a healthy overall pipeline, despite some domestic slowdowns."
| Category | Headline | |
|---|---|---|
Capex | Capex disclosed |
| Category | Target | Priority |
|---|---|---|
| Profitability | Chemicals Segment EBITDA→13-14% | High |
| Profitability | Industrial Infra Margin Band→10% | High |
| Order Inflow | Chemicals Segment Order Inflows→INR 150 crores | High |
| Capacity | Green Solutions Megawatt Addition→250 megawatts | High |
| Capacity | Green Solutions Megawatt Addition→700 megawatts | High |
| Capacity | Green Solutions Megawatt Addition→1.1 gigawatts | High |
| # | Metric | |
|---|---|---|
| 01 | Chemicals Segment EBITDA Improvement | |
| 02 | Q4 Revenue Performance | |
| 03 | Resolution of Problematic Projects (TBSPL, FEPL, NRL, FGDs) | |
| 04 | Data Center Business Development | |
| 05 | Carbon Capture Opportunity Progress |
| Severity | Risk |
|---|---|
high | Chemicals Segment Profitability PBT was INR 48 crores off YoY, impacted by new asset costs, volume reduction, and Chinese competition, resulting in 4-5% EBITDA. Management |
medium | Industrial Products Profitability EBIT margin tracking below 10% and not expected to reach last year's levels due to product mix. Management |
high | Ethanol Market Slowdown Many ethanol projects are stalled, and financial closure is difficult, leading Thermax to pass on orders. Management |
medium | Large Project Execution Delays Large projects, especially government-related with significant civil work, are prone to delays, impacting execution and costs. Management |
high | Problematic Projects (TBSPL, FEPL, NRL, FGDs) TBSPL (bio-CNG) reported a loss, and FEPL projects faced financial trouble with partners, creating an 'overhang' on recurring margins. Management |
medium | Commodity Price Volatility Rising copper and steel prices are a 'slight negative' and could become 'substantial' if the trend worsens. Management |
Thermax reported a mixed Q3 FY26, acknowledging 'one-time📎 items' and 'exceptional item📎s' impacting results. The company's year-to-date revenue until Q3 was 'barely 1% or so ahead' compared to last year. However, management expressed strong optimism for Q4, expecting 'double digit better' quarter-over-quarter revenue performance and a 'reasonably good profitable quarter,' which is anticipated to set up a very good period beyond.
The Chemicals segment experienced a significant contraction in profitability, with PBT being 'about INR 48 crores off' compared to last year. This was primarily due to approximately INR 48 crores in added costs, including INR 30 crores net from new, more efficient assets, 20% for growth initiatives, and 20% for base cost increases. The segment's EBITDA margin was around 4-5% this quarter, down from 17% last year, also impacted by volume reduction and Chinese competition. Management expects a 'reversal starting to show up' in Q4, with a target of reaching 10% EBITDA in Q4 and 13-14% EBITDA next year.
Industrial Products' EBIT margin is currently 'tracking below 10%' and is not expected to reach last year's profitability levels due to a less favorable product mix, with the more profitable heating segment growing slower. Despite this, the backlog is 'building up nicely,' and Q4 is expected to bring improved revenue and profitability. The Industrial Infra pipeline remains 'good,' but management is cautious about large projects, especially government-related ones with significant civil and construction components, due to historical delays.
Thermax saw robust international order inflows in Q3, exceeding INR 1,400 crores, which accounted for 50% of the quarter's business. This included substantial wins in the data center cooling product line, with one domestic and one international project for 'marquee data centre names,' particularly in the U.S. These data center projects are noted for their 'good margins' and 'unique fit,' with management expecting 'increasing capacity and capex investments' in cooling and TBWES in the coming year.
The Green Solutions segment, specifically TOESL, saw 'practically zero' orders in Q3, though Q4 is anticipated to be better. TBSPL (bio-CNG) projects reported a loss this quarter and are slated to go through PGTR in Q4 and Q1 FY27 to move from a 'red line to a black line.' Similarly, two FEPL projects faced 'financial trouble' with partners, causing a 'massive drain' on Thermax, with one project completed in January and the second largely completing this quarter. Overall, new projects starting in March and finishing in June are expected to be 'some of the best projects' with 'substantially better' profitability.
Thermax projects adding 250 megawatts this year, with targets to reach 700 megawatts next year and 1.1 gigawatts by FY28. The company is 'very excited' and 'bullish' about the Indian government's INR 20,000 crores outlay for carbon capture, citing its strong domestic R&D programs and partnerships for EPC capability. Thermax has already won a small biomass-to-methanol project below INR 100 crores, demonstrating its India-based technology in this space.
Management noted that rising commodity prices, specifically copper and steel, are a 'slight negative' for the business. While currently manageable, they cautioned that if the situation 'gets worse from this point on, it could get substantial.' Thermax is actively tracking commodity prices more carefully and implementing strategies like placing orders early and locking in margins to mitigate 'residual risk' from price volatility.