Thermax Q1 FY27 Earnings Call: Guides 2-3 Quarters of Rs.3,000 Cr Revenue, Exits Government Project Exposure

Thermax Ltd held its Q1 FY27 earnings call on July 30, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Toughest Quarter in Years, Full-Year Outlook Bullish

• Rs.91 crore legacy project provision — Q1 FY 2026-2027 absorbed a cost-to-completion hit on a government FGD project (original Rs.1,200 crore order from FY22), triggered by an unanticipated engineering partner change in June 2026.
• ~Rs.300 crore shipment delay — industrial products segment missed revenue from an international Middle East customer due to logistics; a portion moved in Q1, the rest slipped to Q2 FY26-27.
• Rs.20 crore Green Solutions loss — FEPL subsidiary posted a Q1 loss driven by delayed approvals for two completed Tamil Nadu projects (post-election) and carrying costs for a planned external investor platform.
• Rs.10 crore commodity price impact — steel plate prices jumped 18% (Rs.50-53 to Rs.61+ per unit in two months), compressing industrial products profitability.
• Rs.8 crore Bio-CNG quarterly loss — contributed to the drag, with management awaiting imminent government policy changes to generate a significant pipeline.
• Management reaffirmed a bullish full-year FY26-27 outlook — expecting 2-3 quarters of revenue exceeding Rs.3,000 crore, which should improve gross margins and profitability.

Exiting Government/PSU Exposure, Final Cost Impacts Ahead

• Only Rs.300 crore government orders remain — out of a total ~Rs.40,000 crore order book, the last legacy projects (NRL, FJB) exposed to cost escalations are expected to close by Q3 FY26-27.
• Rs.1,200 crore FGD project in final execution — engineering 100% complete, civil largely done; total estimated loss ~Rs.150 crore; invoicing 74% complete, remaining 26% execution over Q2 FY27–Q1 FY28.
• PSU order book at ~Rs.300-400 crore — less than 5% of the total ~Rs.40,000 crore backlog and trending toward zero; management intends to avoid PSU projects unless they have unique technology and can price correctly.
• No new government projects since FY24 — except one small IOCL order of Rs.50-60 crore; management has "decided to exit such projects" unless price points are commensurate with risk.
• Bio-CNG legacy cleanup — four projects remain with performance risk: one delivered, one >50% progress, two to execute in Aug/Sep FY27; Thermax has taken no new Bio-CNG projects for over two years.
• FY26-27 is the last year of impact from past mistakes, per Ashish Bhandari, with any residual legacy cost possibly slipping into Q1 FY27-28.

Data Centers, Supercritical, and Bio-CNG Drive Pipeline

• Order inflow expected to exceed FY25-26 in FY26-27 — driven by industrial infra (repeat supercritical), international projects (Middle East, Africa), data centers (US and India), subcritical/captive thermal, waste-to-energy, and EPC projects.
• Data center backlog of "several hundred crores" in the US — "extremely profitable" but not yet reflected in revenue; cooling offers the greatest differentiation with only 1-2 global competitors for co-located data centers.
• Two major US data center wins expected in Q3-Q4 FY26-27 — MOUs signed with two US solution providers; handshakes expected in Q1-Q2, order booking in Q3-Q4.
• Green Solutions on track for Rs.800-1,000 crore in 2 years — currently at a run rate of Rs.600+ crore; Thermax (green solutions division) is the vehicle.
• Hydrogen: initial order announcement expected in Q2 FY26-27 — revenues start in FY27-28; demo plant for SOEC technology at end of FY26-27; team of 40-50 people with Hydrogen Pro partnership.
• Bio-CNG sector expected to open up from August 2026 — government targeting 5,000 plants versus ~150 currently; management expects a 20-30% price increase for bio-CNG and higher blending mandates.

Industrial Products Grow but Margins Squeezed; Chemicals Resilient

• Industrial products: double-digit YoY growth in Q1 FY26-27 — driven by sustainability trends (ZLD, clean air, cooling, boilers), a trend observed over the last 2-3 years.
• Industrial products profitability dropped in Q1 — due to 18% jump in steel plate prices and lower-than-expected shipments; margin pressure expected in Q2, with recovery in Q3 and Q4 FY26-27.
• Chemicals: double-digit EBITDA in Q1 FY26-27 — guided to grow at least 20% for full-year FY26-27, with volumes recovering.
• Chemicals face headwinds from 10% US tariff and crude volatility — management is "worried about commodity price pressure" and the ability to push price increases, especially in export markets competing with Chinese players; some large US customers are choosing to avoid Chinese suppliers, offering a potential offset.
• TBWES undergoing structural shift — capacity additions, a large thermal project pipeline, international opportunities (Middle East, Africa), waste-to-energy, and data center demand for natural gas power.
• Green Solutions (FEPL) posted a Rs.20 crore loss — delayed approvals for Tamil Nadu projects and carrying costs for an external investor platform; management termed it "not a right business for Thermax."

Line of Sight to 10%+ EBITDA, Recovery Path Mapped

• Management sees line of sight to 10%+ EBITDA margins on industrial infra contribution once legacy projects are completed, with profitability improving significantly in Q2-Q4 FY26-27 over same quarters of FY25-26.
• Backlog of Rs.14,000 crore — excluding Rs.2,500 crore for future years, implies quarterly execution of Rs.3,000+ crore, putting pressure on supply chain.
• Gross margins vary by business — 15% for projects, 45-50% for two businesses, 15-30% for others.
• Industrial products margin pressure in Q2 FY26-27 — management expects recovery in Q3 and Q4; full-year FY26-27 still expected to deliver good profitability.
• US data center shipment delayed to Q3 FY26-27 — a significant portion originally scheduled for Q1 with revenue recognition in Q2 is now shipping in Q2 and recognized in Q3 due to customer-side environmental constraints.
• Management acknowledged "disappointing" Q1 for margins — but committed to full transparency and expects Q2, Q3, and Q4 each to show significant improvement over the same quarters of FY25-26.

Strong Pipeline, Selective Bidding, and Execution Discipline

• FY26-27 is the last year of impact from past project mistakes — management expects the year to be "very good" due to a strong backlog; all FGD projects are on schedule with no further surprises.
• Order pipeline for FY26-27 is better than FY25-26 intake — two large orders (a few hundred crores each) were delayed from Q1 booking but remain in the pipeline.
• Management deliberately avoided large government PSU civil projects in Q1 — focusing on private sector orders, which led to muted order booking in the quarter.
• Project selection process changed since FY24 — perform majority of engineering before bidding, use 3D models for costing, exclude civil/construction for supercritical projects, include commodity and currency safeguards.
• Board suggested issuing profit warnings like IT companies for negative surprises; management will consider this approach going forward.
• Analyst noted a recurring divergence between commentary and actual execution — management acknowledged the concern and said they are working to improve execution consistency.