Thermax shares jump 5% as Kotak upgrades, calls recent correction a buying opportunity

Shares of Thermax Ltd. are trading more than 5% higher on Friday, December 12, after brokerage firm Kotak Institutional Equities upgraded the stock, saying the company is poised for faster growth and margin improvement.

Kotak raised its rating on Thermax to 'Buy' from 'Add' and assigned a price target of ₹3,575 per share, implying an upside of about 28% from Thursday's closing price.

The brokerage said the recent price correction has created an attractive entry point into a company that is benefitting from scale-up in its existing businesses, geographical expansion and the addition of new business lines.

Kotak mentioned that Thermax India stands out among diversified capital expenditure plays because of the strength of its order inflows, even though it does not rely on lumpy orders. A large order win in the third quarter has increased the year-end backlog by 15% year on year, improving revenue visibility.

According to the brokerage, margin improvement looks set to materialise as the share of troubled orders declines, the underutilised chemical business rebounds and favourable mix effects strengthen the products segment.

Kotak estimates pro forma earnings per share of ₹72 for FY25, after adjusting for losses in the projects portfolio, which includes the Bioenergy, NRL and FGD orders, as well as the solar captive business.

The brokerage wrote in its note that the recent correction has made the stock attractively valued at below 40 times these pro forma trailing earnings.

It expects a major portion of margin normalisation to take shape between FY25 and FY28 and assumes a 12% compound annual growth rate in revenues during this period.

Shares of Thermax are trading 2.8% higher on Friday at ₹2,877. The stock has declined 27% so far in 2025.