Archive · 29 Jan 2026
JM Financial Raises Concerns Over Thermax Valuation
Thermax is a company that makes industrial products and is trying to expand into new areas like solar power, bioenergy, and chemicals.
JM Financial, a company that gives advice on stocks, thinks this is a bad idea.
They say these new areas don't make as much money and are riskier.
They also think Thermax is not good at managing big projects.
Because of these reasons, they think Thermax's stock price might go down by 7.5% in the next year.
They suggest that investors should be careful about Thermax's stock.
JM Financial initiated coverage on Thermax with a 'Reduce' rating and a target price of Rs 2,700, implying a potential 7.5% stock decline over the next 12 months.
Thermax's diversification into non-core segments like solar power, bioenergy, and chemicals is viewed as value-dilutive due to lower Return on Capital Employed (ROCE of 0-5%) compared to its blended ROCE of over 10%.
The company's performance in executing large Industrial Infra projects is considered weak, with challenges in low-margin FGD projects and engineering issues in refinery contracts.
Investments in bio-CNG are seen as risky due to chronic supply challenges and high costs, similar to past struggles in sewage treatment plants.
The chemical segment faces profitability headwinds from aggressive Chinese pricing competition and significant US tariffs, complicating margin revival.
- Who
- Thermax, a company with a strong presence in industrial products, and JM Financial, a brokerage firm.
- What
- JM Financial has initiated coverage on Thermax with a 'Reduce' rating, citing concerns over its valuation and strategic shifts.
- When
- The analysis and rating are based on the company's performance and future projections.
- Where
- Thermax operates in India and is expanding into non-core segments like solar power, bioenergy, and chemicals.
- Why
- JM Financial believes Thermax's diversification into lower-return, higher-risk segments is value-dilutive and justifies a lower valuation.
- Company
- Thermax
- Brokerage
- JM Financial
- Rating
- Reduce
- Target Price
- Rs 2,700
- Potential Stock Decline
- 7.5% over 12 months
- Blended ROCE
- Over 10%
- ROCE for Non-Core Segments
- 0-5%
- Net Cash Projection (FY25)
- Rs 1,300 crore
- Net Cash Projection (FY28)
- Rs 1,200 crore