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Lehman overweight on Thermax Ltd

July 7, 2008

Lehman Brothers continue to retain OVERWEIGHT on Themax Ltd after meeting with the company’s management.

Thermax expects strong order-inflow growth in FY09 from cement, steel, and oil and gas sectors. Rising steel prices could impact the company by 50 bps. China facility for chillers will start production from August 2009; the company expects it to break even by FY10.

Thermax has signed a technology transfer agreement for subcritical utility boilers of up to 800 MW. While the company has not disclosed the exact amount payable to B&W for this agreement, the royalties paid would be dependent not on the value of the contracts won, but on the basis of criteria such as tonne per hour delivered.

Lehman expects Thermax to report an EPS of Rs 26.7 and Rs 35.3 for FY09 and FY10 respectively. Lehman has set a Target Price of Rs 563 on the stock.

Dalal Street Analyst View: Being a little bit conservative we have an internal target price of Rs 50 to Rs 475.

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