THERMAX - Investment Analysis: Buy Signal or Bull Trap?
Back to ListInvestment Rating: 3.6
| Stock Code | THERMAX | Market Cap | 35,266 Cr. | Current Price | 2,958 ₹ | High / Low | 4,092 ₹ |
| Stock P/E | 60.0 | Book Value | 341 ₹ | Dividend Yield | 0.47 % | ROCE | 16.5 % |
| ROE | 13.4 % | Face Value | 2.00 ₹ | DMA 50 | 2,961 ₹ | DMA 200 | 3,251 ₹ |
| Chg in FII Hold | -1.08 % | Chg in DII Hold | 0.89 % | PAT Qtr | 111 Cr. | PAT Prev Qtr | 226 Cr. |
| RSI | 52.2 | MACD | -20.5 | Volume | 1,23,324 | Avg Vol 1Wk | 1,59,786 |
| Low price | 2,743 ₹ | High price | 4,092 ₹ | PEG Ratio | 1.72 | Debt to equity | 0.04 |
| 52w Index | 16.0 % | Qtr Profit Var | 7.11 % | EPS | 60.7 ₹ | Industry PE | 40.7 |
📊 Analysis: Thermax shows moderate fundamentals with ROE at 13.4% and ROCE at 16.5%, reflecting decent efficiency but not industry-leading. EPS of 60.7 ₹ provides earnings stability, and debt-to-equity ratio of 0.04 highlights a strong balance sheet. Dividend yield of 0.47% is modest. However, the stock trades at a high P/E of 60 compared to industry average of 40.7, indicating premium valuation. PEG ratio of 1.72 suggests growth is priced expensively. Technically, the stock is near its 50 DMA (2,961 ₹) but below 200 DMA (3,251 ₹), showing medium-term weakness. RSI at 52.2 is neutral, while MACD at -20.5 signals short-term bearishness. PAT has declined sequentially (111 Cr. vs 226 Cr.), raising concerns about earnings consistency.
💡 Entry Zone: Ideal accumulation range is between 2,800 ₹ – 2,950 ₹, closer to support levels and valuation comfort.
📈 Exit / Holding Strategy: Existing holders can maintain positions for stability and sector exposure. Exit strategy: partial profit booking near 3,250–3,300 ₹ resistance. Holding period: 2–4 years, contingent on earnings recovery and improvement in ROE/ROCE.
Positive
- Strong balance sheet with debt-to-equity ratio of 0.04.
- EPS of 60.7 ₹ provides earnings visibility.
- Dividend yield of 0.47% adds shareholder value.
- DII holdings increased (+0.89%), showing domestic institutional confidence.
Limitation
- High P/E (60) compared to industry average (40.7).
- PEG ratio of 1.72 indicates growth is priced expensively.
- ROE (13.4%) and ROCE (16.5%) are moderate compared to sector leaders.
- Sequential decline in PAT (111 Cr. vs 226 Cr.).
- FII holdings decreased (-1.08%), showing reduced foreign investor interest.
Company Negative News
- Sequential drop in quarterly profits raises earnings concerns.
- Premium valuation limits upside potential.
Company Positive News
- Strong balance sheet with minimal debt.
- Domestic institutional support with DII holdings increasing.
Industry
- Industry P/E at 40.7 indicates moderate valuations compared to Thermax’s premium.
- Energy and engineering solutions sector benefits from industrial growth and sustainability initiatives.
Conclusion
⚖️ Thermax is a moderate candidate for long-term investment. Strong balance sheet and earnings visibility are positives, but high valuation and declining profits limit compounding potential. Entry around 2,800–2,950 ₹ offers margin of safety. Long-term investors should hold for 2–4 years, with partial exits near 3,250–3,300 ₹. Conservative investors may prefer peers with stronger profitability metrics and better valuation comfort.