Thermax Limited (THERMAX.NS) fair value

ACCE thesis

Thermax makes industrial heating, cooling, and energy systems: boilers, absorption chillers, water and effluent treatment plants, and air pollution control equipment, sold mainly into Indian process industries such as chemicals, refining, food and pharma. Its edge is a long installed base and an engineering-led project business that is hard to replicate quickly, and India's tightening emissions rules and capacity expansion give the order book a structural tailwind. Revenue is growing about 7.1%, with the forward P/E of 35.5 against a trailing 60.0 implying earnings are expected to recover sharply from a depressed base. The operating margin of 0.4% is the number that needs explaining: it is far below the 34.1% gross margin, so the question for a deeper look is whether project costs and working capital are temporarily compressing profitability or whether the business has a structural cost problem.