THERMAX Q1 FY26 earnings call.
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Revenue
₹2,158 Cr
verified against source
Revenue YoY
-2%
reported change
EBITDA
Pending
latest reported figure
Source
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record provenance
Actual signal trajectory
Where this quarter sits.
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What the record says.
Thermax reported a disappointing Q1 FY26 with -2% YoY revenue decline, the first quarter of sequential decline in three years, attributed to project push-outs where customers delayed equipment pickup due to slow site execution (rains, civil work delays) rather than financial stress. Order inflow growth of 7% fell short of management expectations, particularly in the Heating segment (ethanol/sugar sector) where financial closures are taking longer. EBITDA margin expanded approximately 120bps organically excluding a INR 56 crore government incentive (net INR 27 crore after tax), driven by absence of prior-year losses in Industrial Infra rather than operational improvement. Chemicals margin compressed to ~9.3% due to new Jhagadia capacity depreciation, headcount additions, and one-time settlement costs, though management targets recovery to 12-13% in Q2. The INR 700 crore of legacy project backlogs (FGD, Bio-CNG) continues to drag Industrial Infra, with most expected to clear this fiscal year. New product innovation (110°C heat pumps commercialized, electric boilers ramping to 10+ units/quarter) and international expansion (qualified at ADNOC, Middle East pipeline strengthening) provide long-term growth vectors. Management remains confident in double-digit order inflow growth trajectory for FY26, expecting Q2 to show strong recovery across Industrial Products and Industrial Infra.
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Guidance to track
- Management expects order inflow growth to accelerate to double-digits in FY26, driven by robust inquiry pipeline across power, cement, steel, and international markets. Industrial Products has been delivering double-digit growth, and Industrial Infra pipeline is the highest in four years.
- Chemicals EBITDA margin is expected to recover to 12-13% in Q2 from Q1's ~9.3%, driven by volume ramp-up with new capacity utilization improving. Long-term target remains 16-17% as growth delivery catches up to investments.
- International order book from exports (excluding Danstoker, PT TII) is targeted to cross INR 1,000 crore, with Middle East showing strongest traction (qualified at ADNOC, pursuing Aramco qualification). Southeast Asia and Africa pipelines developing.
- Green Solutions portfolio expected to cross 300 MW operational capacity this fiscal year, with another 300+ MW in construction across Gujarat and ISTS projects (Andhra Pradesh, Tamil Nadu). Equity investment of INR 400 crore planned at 30/70 debt-equity ratio for new projects.
Risks flagged
- U.S. exposure of ~$30 million (including cooling) faces potential tariff impact. Additionally, very aggressive pricing from China is pressuring both U.S./Europe markets and Southeast Asia. If tariffs persist beyond Q2, Chemicals growth targets could be impacted.
- Heating segment pipeline (ethanol, sugar, distilleries) remains robust but financial closures are taking longer than expected, causing order booking delays. Management notes July showed improvement but Q2 timing remains uncertain.
- Legacy FGD projects have significant claims on customers expected to be settled upon completion. CEA guidelines clarity on claim processing remains outstanding, creating uncertainty around timing and value recovery of these claims.
- Bio-CNG business is no longer a major drain but continues to generate only high single-digit margins rather than being accretive. Management indicates the business is not completely out of the woods despite improved trajectory.
Key quotes
- The impact is temporary. As the revenue clears, we will actually be able to deliver reasonably on the bottom line as well.
- We have been saying it for some time. There was, of course, a big INR 56 crore impact from incentives that we received from the government. But even if I leave those aside, we have about 1.2% improvement in margins, which is entirely driven by basically not having as much bad stuff as we did last year.
- What we are seeing overall, not just U.S., but U.S. and Europe, very aggressive pricing from China. And not only aggressive pricing from China, on top of that, seeing this impact of tariffs creates a bit of an issue. Not as much for Q2, because by the time some of the impact of the tariffs come, a lot of what we need to deliver, hopefully, will be out of the way.
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