Thermax witnessed strong execution with a growth of 29% y-o-y to Rs 14.4 bn, while Ebitda margins declined 110 bps y-o-y to 7.5% impacted by higher commodity prices, pricing pressure and booking of loss under the European subsidiary Danstoker. The management is confident regarding turnaround of the loss making overseas subsidiaries going forward and hence the margins are expected to improve. Healthy order intake and participation on NTPC bulk tenders for FGD orders and small to medium size orders from food processing, dairy, auto and light engineering segments provide growth visibility. We factor-in 14% revenue CAGR over FY18-FY21, resulting in 26% earnings CAGR. Control over working capital leading to healthy cashflow from operations driving free cashflow despite capex towards new capacities, will support valuations. We maintain our 'Add' rating on the stock, with a revised target price of Rs 1,133 (30x FY20E earnings). Also Read:\u00a0Not so sweet! Millers' sugar offer in lieu of FRP fails to cheer farmers Led by tyre sector capacity expansion by Bridgestone, MRF, TVS etc, medium size (>Rs 2bn) order from Grasim, food processing industries, sponge iron orders, chemical and paper industry orders have supported the overall order intake growth. Thermax will be participating in the Lot II FGD orders of NTPC given the easing out of liquidity concerns by reducing the retention rate; hence, the overall order intake growth outlook is healthy. Though execution has been strong at 28% y-o-y growth during 9MFY19, the margins had declined 210 bps y-o-y to 7.4% impacting the overall earnings. Due to high commodity prices and competition intensity, the domestic margins were lower, while losses from European subsidiaries subdued the overall margins. Overseas subsidiary performance is expected to turn around which coupled with gradual improvement in domestic margins will enable improvement in the overall margins.