Thermax (THERMAX)

FairStock Score: 39/100 — MIXED

Score breakdown: P/E: 0/3 · ROCE: 1/2 · Growth: 2/2 · Dividend: 0/1

Key Financials

Strengths

• Strong balance sheet: debt/equity only 0.36 and Altman Z-Score 3.38 indicates financial stability
• Piotroski F-Score 8/9 suggests solid financial health and operational efficiency
• Decent capital returns: ROE 13.81% and ROCE 16.22%
• High promoter holding of 61.99% aligns management interests with minority shareholders
• Five-year revenue CAGR of 16.74% shows a good historical growth track record

Concerns

• Extremely expensive valuation: P/E 57.98, P/B 9.80, EV/EBITDA 81.26 and PEG 10.00
• Graham Number of ₹730.29 versus price of ₹4,059.70 gives a huge negative margin of safety at -326.93%
• Recent sales growth is only 2.56%, far too slow to justify the high multiple
• Free cash flow is negative at ₹177 Cr despite reported profits, and dividend yield is only 0.45%

AI Analysis

I admire a business with a strong balance sheet, and Thermax has one: debt/equity at 0.36, Altman Z-Score of 3.38, and a Piotroski F-Score of 8/9. Promoter holding of 61.99% aligns ownership. Return on equity is 13.81% and ROCE 16.22%, respectable for heavy electrical equipment, and that gives me some confidence there is a defensible niche. The five-year revenue CAGR of 16.74% shows the business has compounded well historically, and the latest quarter earned ₹205 Cr on ₹2,635 Cr sales. But I cannot ignore the price. At ₹4,059.70, the market cap is ₹37,151 Cr, yet the Graham Number is only ₹730.29. That is a negative margin of safety of roughly 327%. A P/E of 57.98, P/B of 9.80, EV/EBITDA of 81.26, and PEG of 10.00 all tell the same story: the market is paying an extraordinary premium. The recent numbers do not justify it. Sales growth is just 2.56%, profit growth 10.16%, and free cash flow is actually negative at ₹177 Cr. Dividend yield of 0.45% is negligible. The Altman score says the company is safe, but safety of the business does not make the share price safe. Moat or no moat, price matters. Thermax may be a good company, but a good investment requires good price. With current earnings and cash flows, I see no margin of safety. I would rather wait for a lower price or a significant growth acceleration. In the meantime, I'd pass.

Data from BSE/NSE filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer