Stocks to Buy: Here's why analyst recommends Thermax, JSW Cement

According to Shrikant Chouhan of Kotak Securities, Thermax strong earnings prospects and JSW Cement capacity expansion plans augur well for these two stocks.

Thermax

BUY  CMP: ₹2,897  FV: ₹3,575  Resistance: ₹2,950/ ₹3,150    Support: ₹2,760/ ₹2,600  Thermax has been a key participant in the energy and environment solutions space with a long operating track record. Among diversified industrial capex companies, Thermax stands out for the quality of its order inflows.  In H1FY26, order intake was strong at around 1.3x revenues, achieved without reliance on large, one-off orders. Momentum strengthened further with a sizable order win in Q3FY26, supporting expectations of nearly 15% yoy growth in the year-end order backlog and enhancing medium-term revenue visibility.  Management has reiterated guidance of ~20% yoy growth in order inflows for FY26, broadly in line with the H1FY26 run rate. Demand has been particularly robust across metals and mining, waste-to-energy power projects, and the food and beverages segment.  The company's portfolio continues to benefit from scaling up of established businesses, geographic expansion, and entry into new adjacencies. Select verticals such as waste-to-energy and water have scaled to close to, or even above, $100 million in size and are witnessing increasing traction across both domestic and Middle Eastern markets.  Additionally, new capacity additions and expansion projects across thermal power, cement, and steel sectors are expected to support incremental order inflows. Thermax is also targeting new growth avenues, including data centers (covering water, cooling, and environmental solutions), entry into oil and gas opportunities in the Middle East through a marquee client, and HRSG opportunities linked to gas-to-power projects in the region. Beyond the Middle East, management sees potential in CIS countries and Latin America as emerging markets.  Margin outlook appears constructive, driven by a decline in the proportion of low-margin or troubled orders, recovery in the previously underutilized chemicals business, and favorable mix improvements within the products segment. Only about 5 per cent of the current order backlog remains weak in profitability, with limited risk of incremental downside. Legacy low-margin orders are nearing completion, including residual execution in projects such as NRL, the completion of the second FGD order in Q3, and bio-CNG projects approaching closure.  We estimate a 12 per cent revenue CAGR for Thermax over FY25-28E, with stronger EBITDA and PAT CAGRs of ~19 per cent and ~16 per cent, respectively, aided by modest margin expansion. Valuations appear attractive at ~40x trailing earnings. We have Buy rating on Thermax with a fair value of ₹3,575, based on 40x two-year forward earnings, with additional value from green energy and thermal projects. 

JSW Cement

BUY  CMP: ₹120  FV: ₹135  Resistance: ₹128/ ₹135  Support: ₹115/ ₹107  JSW Cement (JCL) is primarily engaged in the manufacturing and sale of cementitious products, including blended cement such as Portland Slag Cement (PSC) and Portland Composite Cement (PCC), as well as Ordinary Portland Cement (OPC) and Ground Granulated Blast-Furnace Slag (GGBS).  JSW Cement is India's largest producer of GGBS, with an estimated ~84% market share in FY2025. GGBS is a niche, high-growth product derived from slag and is widely used as a substitute for cementitious materials in concrete mixes. It is among the most effective replacements for OPC and fly ash in concrete manufacturing, and its demand is expected to rise with increasing awareness of its benefits among key decision-makers and certifying authorities.  We believe JSW Cement is well positioned to expand the GGBS market, supported by its higher share of GGBS in the overall product mix, superior margins, and a strong moat in slag sourcing. The company also benefits from synergies associated with the long-established JSW brand.  Approximately 90 per cent of slag requirements are sourced from JSW Steel, India’s largest steel producer, and JSW Cement strategically locates its plants near JSW Steel facilities to optimize transportation costs. This structural advantage makes it difficult for competitors to source slag at comparable costs. We expect GGBS demand to grow at a mid-double-digit rate over FY2025–28E, driven by cost advantages, low penetration levels, and favorable product characteristics.  The company is currently undertaking a 4–5 year expansion program through a mix of greenfield and brownfield projects across India. We expect JSW Cement to add 6.3 mtpa of greenfield capacity in the northern region over the next two years, which would establish its presence in four of the five major regions by FY2028E.  We further expect the company to initiate another greenfield expansion in the central region by the end of the decade, subject to the ramp-up of northern capacities and balance sheet strength. Following this, JSW Cement would join peers such as UltraTech Cement and ACC Cement in achieving a truly pan-India footprint.  JCL has demonstrated a strong track record, delivering sector-leading capacity and sales CAGRs of 13 per cent and 16.7 per cent, respectively, over the past decade. We forecast volume and EBITDA CAGRs of 12 per cent and 18 per cent over FY2024–28E, driven primarily by upcoming capacity expansions.  (Disclaimer: This article is by Shrikant Chouhan, head equity research, Kotak Securities. Views expressed are his own.)