Thermax

Thermax reported a Q4 FY26 with improved revenue and execution, aligning with its plans. The company booked a significant supercritical job worth approximately INR 1,600 crores, contributing to a robust order book. The overall order balance stands 27% better than the prior period closing, providing a strong foundation for future revenue opportunities. Management noted a 'reasonably robust' order book for the quarter, even excluding the large supercritical project.

While the Thermax Onsite Energy Solutions (biomass-based heating) business performed well, the First Energy business (wind and solar hybrid) faced a cost overrun on a project in the South. This was due to a contractor's failure to perform, forcing Thermax to step in and complete the contract, leading to unexpected costs that impacted Q4 results. Despite this, the company has approximately 250 MW of green solutions capacity on the ground, with plans to commission more projects in Gujarat and the South in the next two to three quarters, aiming for a 'much better' number by FY27.

The company indicated that raw material price increases across commodities like steel, styrene, copper, and nickel did not significantly impact Q4 FY26 margins, as procurement for the quarter was completed before the full impact of March's war-related price movements. However, these price increases are expected to pose a challenge for Q1 FY27. Management is focused on maintaining margin numbers and planned volumes for the Industrial Products business, while the Chemicals business is already experiencing raw material supply disturbances and price increases.

Thermax sees a robust and interesting opportunity in the data center market, both internationally and domestically, for cooling and boiler solutions. The company secured its first set of cooling orders in Q3 FY26 and is confident about a potential boiler supply opportunity for a data center in Q1 FY27. To support anticipated growth, Thermax plans a regular capex of INR 100-150 crores for FY27, along with additional capacity expansion in its boiler and cooling facilities, totaling roughly INR 250 crores for the year.

Working capital saw an increase in Q4 FY26, primarily attributed to project delays and subsequent collection delays on receivables, including retentions across several large orders. Management is actively focusing on improving working capital in the coming quarters, aiming to resolve overdues within one to two quarters. Large projects, such as the supercritical order, have extended execution timelines of 40-45 months, while other significant orders are expected to be executed over 16-18 months.

Thermax maintains a positive outlook on its order pipeline, particularly in green energy solutions like coal gasification and Bio-CNG, hoping for government support to enhance commercial viability. However, the company remains cautious about the potential impact of a prolonged war on various industries in Q2 and Q3 FY27. Despite some slowdown in FGD and Bio-CNG order books, management is optimistic about future opportunities in these segments and is committed to protecting margins on large EPC projects.