Thermax (TMX IN) – Q2FY26 Result Update – Weak Q2; back ended revival on cards for infra – Upgrade to ‘Accumulate’

We cut our EPS estimates by -8.0%/-3.5% FY27/28E factoring in continued execution challenges in Industrial Infra segment. Thermax (TMX) reported another muted quarter with revenue down 3.0% YoY and EBITDA margin contracting 137bps YoY to 7.0%. Performance was weighed down by execution challenges and cost overruns in Industrial Infra; however, most low-margin projects are slated for delivery in H2FY26, leaving a healthier backlog for FY27. In Industrial Products, high margin business of heating equipment grew slower than relatively lower margin Water and Enviro impacting the segment’s product mix. Meanwhile, orders remained healthy, with sustained traction across water, enviro, and heating expected to continue into H2FY26. The Chemicals segment is seeing early traction from recent investments, with order bookings expected to stabilize at ~Rs2.5bn per quarter. Green Solutions delivered strong margin improvement on operational gains, with management reaffirming its ~Rs7.5bn investment commitment to reach 1 GW capacity. Execution challenges will remain a key monitorable in the short term. However, in the long term, TMX is well placed to gain from increasing thrust on energy transition & de-carbonization led by its 1) sustainable green industrial solutions in bioenergy, heating & cooling, chemicals and water, 2) technical expertise, and 3) prudent working capital management. The stock is currently trading at PE of 44.6x/39.6x on FY27/28E. We roll forward to Sep’27E and upgrade our rating from ‘Hold’ to ‘Accumulate’ given the recent sharp correction in the stock price and value the core business (excl. Green Solutions) at a PE of 38x Sep’27E (40x Mar’27E earlier) arriving at a SoTP-derived TP of Rs3,513 (Rs3,633 earlier). Upgrade to ‘Accumulate’.