THERMAX Q1 FY25 earnings call.
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Revenue
₹2,184 Cr
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Thermax reported a tough Q1 FY25 with multiple one-off hits primarily in the Industrial Infra segment totaling approximately INR 70-75 crore. Key losses included INR 45 crore in the bio-CNG business (TBSPL and Thermax Limited combined), INR 8 crore from FGD plants, and INR 20 crore from a sulfur recovery unit. Management characterized these as front-loaded pain points with limited recurrence expected. The Industrial Products division showed stable performance with 5.5% margin in Q1, expected to improve year-on-year. The chemicals business is ramping up with construction chemicals already at INR 100+ crore run rate, targeting INR 200-250 crore overall. On the thermal power opportunity, management is cautiously evaluating split packages (boiler packages) as the government addresses payment term concerns—Thermax has declined full EPC bids citing cash flow risks. Bio-CNG subsidiary TBSPL has accumulated over INR 100 crore in losses since inception, with technology and process issues now understood. The order pipeline remains healthy with international business recovery and continued interest in water, wastewater, and air pollution control solutions. Risk includes FEPL (green solutions) continuing to be loss-making due to project delays and below-expected wind/solar generation.
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Guidance to track
- Management expects Q1 to be a trough quarter with margin recovery in subsequent quarters barring unexpected hits, as sulfur recovery unit project (95%+ complete) and bio-CNG plants are now better understood.
- Management expects good year for industrial products with double-digit order and revenue growth, driven by water, wastewater, air pollution control and international recovery.
- From INR 175 crore base, chemicals business expected to reach INR 200-250 crore run rate in FY25 with Dahej plant utilization improving and construction chemicals scaling up.
- Pipeline of 3 refinery projects (CPCL in H2, Paradip and Bina Refinery next year) and thermal power orders expected from split packages; CEA breaking projects into smaller boiler packages making them more manageable.
Risks flagged
- TBSPL has taken over INR 100 crore in total losses including INR 44 crore in Q1 alone. Technology and process issues are now understood, but management acknowledged no plant is fully functional yet and will not claim success until delivery.
- Frost Energy Photovoltaic (FEPL) expected to be loss-making for full FY25 due to Tamil Nadu flood impacts delaying solar panels, wind project site selection delays, and below-expected wind/solar generation from climate factors.
- Finding large numbers of workers at site has been challenging for 12+ months due to elections, rains, and broader labor market constraints. This has elongated project timelines and added costs across high civil-content projects.
- Analyst raised concern about government sector receivables and whether terms will improve for thermal power projects. Management declined full EPC bids citing bank guarantee risks, payment terms with no sunset clauses, and historical inability to make money on government projects.
Key quotes
- This particular project, we took the highest hit, which was INR 45 crore. This INR 45 crore is INR 30 crore in TBSPL and INR 15 crore in the in Thermax Limited. This INR 45 crore has been taken into account, not just for correcting some of the things we are doing in this quarter, but for future quarters as well.
- FGD has been part of constant pain for us... we went through an extended audit of those businesses, those projects, and came to an understanding that while we have a lot of asks from which are change orders and all that, because of the delay in some of these projects, we will encounter additional site costs, and we will have to pay our vendors more than what we had originally envisioned.
- We have said completely no to [full EPC projects]. Not only us, the entire industry has come back and said, 'We don't want to.' Also, there were a lot of risks on these projects relating to bank guarantees, payment terms, that had no sunset clauses, had no ends.
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