HDFC Securities has retained 'Neutral' on Thermax with target price of Rs 951 as against current market price (CMP) of Rs 945 in its report.

Thermax's 2QFY15 PAT of Rs 860 million was ahead of our estimate, driven by higher than expected other income. Operationally, results were in line. Order inflow of Rs 10.8bn (+42% YoY) was also in line with our estimate. Standalone order backlog declined 5.5% YoY to Rs 50 billion.

After 10 quarters of decline, revenues grew 14% YoY in Q2, aided by execution of order from Reliance industries. However, domestic order inflows are yet to pick up in a meaningful way and management expects improved traction only from FY16 onwards.

We like the company's strong balance sheet and solid execution track record, however high valuation (24x FY16E EPS) caps upside. Retain Neutral with a Mar-16 TP of Rs 951/sh based on 20x FY17E EPS.

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