Detailed Narrative
Q4 FY25 Performance Overview
Thermax delivered INR 3,000 crores in revenue for Q4 FY25, meeting management's consistency expectations. Despite this, the quarter was eventful with a miss on order inflows compared to the committed targets. The company absorbed a significant hit of over INR 85 crores from the bio-CNG business, including a INR 66 crore technology hit, yet managed to deliver overall profitability across its businesses.
Bio-CNG Business Challenges and Future Strategy
The bio-CNG segment faced substantial challenges in Q4 FY25, resulting in a financial hit of over INR 85 crores due to technology interventions and inability to meet guarantee numbers. Management acknowledged the 'finicky' nature and marginal economics of the industry, emphasizing the need for policy support. After a year of no new orders, Thermax plans to selectively take two bio-CNG orders in Q1 FY26 with reduced yield guarantees, focusing on learnings and strategic partnerships.
Segmental Performance and Margin Trends
Industrial Products had a 'fantastic quarter' with a strong 14.4% EBIT margin in Q4 FY25, exceeding internal estimates. Chemicals segment's full-year EBIT margin was around 12%, with management targeting 'high teens' in the future, despite initial lower margins from new acquisitions like Buildtech. The Green Solutions segment, particularly FEPL, incurred a 'big loss' for FY25, but management expects a 'significant reduction' in FY26.
Order Inflow and Pipeline Outlook
Thermax missed its Q4 FY25 order inflow target of INR 3,000-3,300 crores, attributing it to a few losses and pushouts. However, the Industrial Products backlog is nearly 20% higher year-on-year. The Industrial Infra pipeline is described as 'decent,' with opportunities in refining, petrochemical, power, steel, and international projects, including orders ranging from INR 300 crores to INR 1,000 crores expected to be addressed in the next 1-3 months.
Learning from Project Execution and Strategic Focus
Management addressed historical challenges with large project execution, citing examples like TBWES, which transformed from accumulating over INR 100 crores in losses to having over INR 1,000 crores in cash. They emphasized that learnings from past projects, including FGD and bio-CNG, are being imbibed to strengthen execution. The strategy involves focusing on repeatable projects, increasing services revenue, expanding internationally, and investing in new technologies like hydrogen and carbon capture.
Capex and Product Innovation
Overall capex for FY26 is expected to be relatively lower, with investments primarily directed towards debottlenecking the heating plant, continued capex in the Chemicals segment, and ongoing investments in Green Solutions. Product innovation remains a key focus across Industrial Products, including heat pumps, zero liquid discharge solutions, ultrapure water capabilities (via TSA acquisition), and advanced air pollution control systems.