Thermax Limited
NSE:THERMAX
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
2 519.15
5 662.95
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Thermax Limited
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Thermax Limited Q3 FY '23 Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Ashish Bhandari. Thank you, and over to you, sir.
Hello, everyone, and a very warm welcome to this call, and I wish you all a fantastic Monday and a fantastic week as well.
As you know, we released our earnings a few days ago. And you would see a few different things from our earnings, consistent with what we had spoken, yes, first that on the orders front, while we see a lot of strength in our general momentum across industries, overall, we have fewer bigger opportunities to work with, and that showed in this quarter. It will continue to show for the next few quarters as well.
Second, on the revenue side, we spoke of moderating challenges on the overall commodity cycle. So that is showing as well that things are consistent, a lot more predictable. Overall, operationally, I don't think we are having as many surprises, which is a good thing. So there is some consistency, and that consistency in some of those trends are also something we had spoken about previously.
Third thing, which is how is the market doing, what is the overall environment like. I would say still more glass full than glass empty, a tremendous set of opportunities, especially as we start to look at some of this climate change set of technologies, what they bring about. And so we are entering a phase for Thermax where our mix of the kind of work we do will go through continued change between now and the next couple of years. And in that mix, a lot of hard work that goes through -- has to go through in this immediate period, yes.
And this is also going to be a period then that we will be looking to invest more, get back into some newer areas, which may come with some amount of risk, et cetera. So that could be some of the framework that we have for our discussion today.
Like previous times, would speak less at my end, would love to hear questions from you and answer those questions. So let's just get started with the questions.
[Operator Instructions]
Rajendran, you're on call as well, yes?
Yes, I'm with us, yes.
Okay.
We have the first question from the line of Sujit Jain from ASK Investments.
Just wanted to know, you had spoken in the past about your OpEx business, which is where you're putting utilities at the client end. What kind of capital employed sitting as on today that you have in this business and what kind of ROC you expect in that business?
Okay. Rajendran, would you want to take this question?
Yes, sure. So Sujit, thanks for that question. I think we roughly have invested close to about -- as you know, we have 2 businesses on this front. One is a solar business, and the other one is where we offer our steam and water treatment solutions on pay-per-use model. And in both of those businesses, I think put together, we would have close to about -- I would say, about INR 400 crores of investments at this point of time. And the internal IRR requirements, I wouldn't want to be sharing that exactly, but it's upwards of 15-plus kind of requirements that we would look for on the equity IRR side.
Okay. And if you can just split that between solar and TOESL, I presume First Energy is the entity in which the solar business will be housed, and TOESL is the entity where this water treatment and other utilities business will be housed, right?
You're right.
So if you can just give the split of INR 400 crores between the 2 entities.
Yes. So roughly about -- while the -- I presume that we would be talking about equity investments from our side. There would also be debt, and overall capital employed would be slightly more. From an equity investment standpoint, our investment in First Energy would be nearing about INR 150 crores, and the balance would be in -- the balance of the investments are in the TOESL business.
And the debt would be in both these entities?
Debt is a number which I will revert back and give you the number over during the course of the call.
Safe to assume that TOESL will not have debt, but First Energy will have commensurate debt, something like 80%-20%, right?
Both entities would have debt.
Okay. And 15% IRR for both entities combined. But I'm sure that First Energy targeted IRR will be lesser and TOESL will be higher, and that is where 15% will come, right?
No, I think as I said, I just gave you a rough number on the expectations that we would have. But I think our internal numbers, I'm not -- we do not want to disclose that at this point of time.
Rajendran, I would -- I think it would be fair to say the weighted average is higher than 15%. 15% is our minimum expectation, and that is on the solar range. The biomass side comes in higher, yes. Solar is proportionately also a slightly lower-risk project because the OpEx and some of the regular tenure of the contract, et cetera, it's a little simpler in some ways. Biomass, because of slightly more complexity, has got a bit more challenges and hence an expectation that the IRRs are higher as well. Traditionally, our IRRs in biomass have been about 3% higher than what is -- what we talk about on the solar side.
Going forward also, our equity investments will likely go more on the solar side than on the biomass side because the biomass side is already generating a fair bit of cash of its own. Even that is on a growth mode but will require lesser equity investments than the FVPL one because the FVPL one is on a much higher growth trajectory.
Sure. And the margins that you have achieved in energy, 7.6%, do you see further improvement going forward and reverting back to something like 9%, 10% you used to do?
I'll say, I've been saying this for some time, yes, look at our business as a blend of 3 different businesses. One of the parts that you spoke about yourself is the solutions business, which is where we provide utilities, green utilities. Whether it be solar-based or wind-based OpEx, we are getting -- our last 2 projects are wind and solar both, so it's hybrid. And then the TOESL portion as well. So this part of our business, we look more at as what is your return on equity, what is the long-term cash back relative to what you invested and not really at the profitability.
Solar, as an example, will be a loss-making business for us this year and even next year will be -- likely be a loss-making business because while we are putting up -- by next year, we expect to reach 200 megawatts from 0 a year ago. So that's a very big ramp-up. So the whole team, everything that we have put together to be able to put that, the earnings that will come will be over a longer period of time.
So those, even the TOESL business as we look to take it international, take to -- take it in a much, much broader way, will be going through a period of investment. So both of these are businesses that we like quite a bit but will not likely provide the profitability that you are looking at in the short -- in the immediate term. Yes, long term, they've got very good profiles.
Second thing I would say, our projects business historically has been 5% to 6%. We think maybe you could increase the profitability out there to give more of a range of 5% to 8%. But that is the range that it will go in. That business is also very good from the point of return on capital because it's running off a depreciated base, very little capital goes in, it works on a negative working capital, so that -- and it's on a growth path as well.
So that 5% to 8% profitability, we like. Yes, we manage our risk within that. We manage all of our vendor payments, customer, manage -- all the things that happen, all of it is managed in a negative working capital environment. So we like to keep it that way.
Then the third part that we have is our products business and products and associated services business. There, I think we would like to aspire to get to a 10% business, 10% profitability. We are not there. If we get a longer run of a good economic environment and consistent commodity prices, I think we can aspire for 10% profitability.
Though even there, right now, with all, everything that is happening in hydrogen, water is having multiple new technology trends, we want to be in a period where we are investing in newer things. So again, I would say 10% profitability may be something that we can do in our base business, but as a blended business, energy, I don't think we will get to 10% soon.
So blended basis, it will be 5% to 7%.
So both assets, blended basis, there's a long big gap between 5% and 10% margin. Yes, I think we can do better to show how our 3 businesses are mixed up. But you, too, can take a look at, yes, FVPL will report out, TOESL, we will report out. Both of them fall within energy. We'll start to report out some of our other elements as well, but -- which is our TBWES business, you can see that separate. Our projects business is somewhat similar to our TBWES business.
What remains after that is our products business. And the products business has got a fair bit of what is called environment here. The entire water business, our environment, pollution control business are very strongly product businesses. There, I think as a blended number, we should be looking at good at least 8% to 9% profitability even in the short to medium term and aspiring to 10%.
So Sujit, I think I have the numbers which you're asking for. FVPL debt would be about INR 120 crores, and our total debt would be about INR 90 crores.
[Operator Instructions] We have the next question from the line of Renjith Sivaram from Mahindra Mutual Fund.
Congrats on good set of numbers. Just wanted to get some thoughts from you in terms of the order pipeline going ahead in terms of the order funnel that you're looking at. Because even in the television interview, you were a bit not that positive about -- you were kind of trying to hint that the peak of the ordering is kind of over, and from here on, the high base will catch up soon.
So just to get more granularity, like what are you seeing sitting there? Because even this quarter also, we had a decent kind of a number in terms of order intake. So how do you see that going forward?
So I've been saying that for some time now, and I think I've been saying this for 2-plus quarters at least, but we don't see a big pipeline of big projects, which were the petrochemical projects and the FGD projects. Both of those, we have been saying that the wave is over. And specifically on petrochemical, I think 6 months ago when there was one -- actually 2 major projects, both of which for one -- was for one major refinery, we had taken a step back from quoting at very low prices, yes, and saying, look, we would rather go for some better-margin businesses because we could see a fair bit of opportunity in our different set of projects.
And I'll maintain that, yes, that we are seeing good momentum, we are not seeing any sort of concern that we have crossed a peak or anything. The top line will be challenged because you don't have a INR 1,000 crore, INR 800 crore order, which we had 2 of last year, and we are still backfilling what remains with a lot of things that are in this INR 10 crore to INR 50 crore mix, and we have to sell a lot of them to get to a INR 1,000 crore order, as you can imagine. And the fact that we are still doing it and coming somewhat close is a testament to an overall health in pipeline that we see and an overall cycle capability that we see.
And I'll continue to be in that vein. I think this year also, we see reasonable momentum, and we see reasonable momentum going into next year. We don't see big projects. So if we don't see big projects, it will hurt our ability to show good growth in the order book side. But that said, we should be getting into a place where we should be able to grow our order book somewhat. At least that's the plan that we are building.
Okay. And if you can just throw some clarity, which are these areas where we are still seeing demand and you're positive on?
It's a lot. Yes, if you take a look at -- and a lot of these are associated with energy transition. Yes, so the steel sector is one which is possibly not driven by energy transition but is driven by a lot of the steel industry coming in and saying, look, we need to put in new CapEx. So there, we are seeing momentum.
The entire sugar, ethanol distillery space is space which is continuing to be strong. It has been strong for 12 months, will be strong for at least another 12 months, in our opinion.
Cement, we have got new capacity coming in. So previously, we were going through a wave of brownfield replacements for waste heat recovery. Going forward, we will be seeing new capacity coming in and then the tail end of the waste heat recovery cycle.
Yes, chemicals, we are seeing a wave of momentum, which is continuing from what we have seen in the past. Decent activity in pharmaceuticals, decent in food and beverages. So overall strength other than a couple of sectors, especially refining and petrochemical will be weaker, but otherwise, we see decent momentum across sectors.
Okay. And sir, what's the status of the European subsidiaries currently? Like we have all the challenges in terms of the winter and gas prices, everything over? Or you still believe that there is some more challenges out there?
No. We see, I think, improved numbers. The gas challenges and all have come down. They have reasonably strong demand as many of the European countries look to cut their energy supplies off Russia.
So we see we are okay overall. I don't think it'll be great. It won't become a 8%, 10% profitability business. But as we look at the next 12 months, we don't see it as being a drain at least. Yes, we don't expect losses. We expect continued low profitability but continued profitability, reasonable volumes in our European operation.
[Operator Instructions] We have the next question from the line of Deepak Krishnan from Macquarie.
Congratulations on a good set of numbers. I just wanted to understand, in terms of our FGD communication, the 2 legacy projects, are we largely behind given that we've been reporting good, about 6% margin for the last couple of quarters?
Sorry, could you repeat that? What -- if you could be slightly louder, the FGD margins, and then I lost you.
Yes. The 2 FGD orders, the legacy ones that we were facing issues, are those largely behind us? Because we've been reporting 6% margin for the last order that we're executing.
Sorry to interrupt you, Mr. Deepak, but your audio is not very clear. If you could go off the speaker phone and repeat your question?
Sir, is this better now?
Yes.
Yes. Sir, I just wanted to check on your enviro segment margins. They've been pretty strong over the last 2 quarters. So if the large issue of the FGD projects is largely behind, should we kind of expect that the next 2 that you are executing are at a much more -- better margin profile?
So what happened -- what was happening on the FGD is, as you can imagine, you have a base cost with the FGD business and because you look at a project-based revenue recognition, and there are some specific milestones that you need to hit to recognize revenues. So far, the revenue we were recognizing was relatively small, which is why that base cost that we have, we were not able to liquidate it to the extent that we would have liked.
FGD is now -- for the past 2 quarters and especially in the last quarter and for the foreseeable future, is getting into the place where revenue will start to get liquidated. So we don't expect, as things stand, for the FGD business to be making -- or to be reporting losses. It will not be making a lot of profit either, yes, but we expect it to make consistent profitability going forward and with the revenue schedule that is maybe slightly delayed relative to what we may have previously committed but only slightly, very, very marginally lower than what we have previously committed.
Rajendran, anything to add?
Sir, the operator here. Sir, Mr. Rajendran has got disconnected, and we are trying to reconnect him back again.
Okay. Sure.
Sure. Ashish, maybe another follow-up question for you then. Just wanted to kind of understand, while you're saying that we have -- we don't have large INR 1,000 crore orders, but we've already declared a close to INR 200 crore ESP order then. What is the pipeline in terms of those midrange orders, the INR 100 crores to INR 200 crores? Because our base business, which used to be about INR 1,300 crores and went to INR 1,600 crores and today now at INR 2,200 crores, looks like it's sustained at these levels. Is that understanding correct?
I think maybe not INR 2,200 crores. It's not like, I think, even this particular order which you saw, it made the threshold by INR 1 crore, yes. And the threshold was set when we were a INR 5,000 crore business that we need to report out anything that is above INR 250 crores. And at one point, when our threshold had gone down below INR 5,000 crores, we were reporting things that were above INR 200 crores as well.
Going forward, we need to change our threshold. And to me, this is also -- the ESP order was not something that merited reporting out. It is just order in the normal course of business. In the INR 50 crore to INR 200 crore orders, we have had quite a few in the last couple of quarters as well. Yes, so it's not like we haven't had momentum. We have had a fair bit of momentum. And we will continue to have these kinds of projects in the future as well.
Yes, I think INR 200-plus crore orders, look, if we look at our pipeline, maybe there are 2 or 3 more that are possible in the next couple of quarters. But I think we would be okay even if we don't get those kinds of orders. Yes, I think we see enough strength in the smaller book to be able to hit a INR 200 crore order book on a consistent basis. I think that we should be able to achieve. And...
And sir, so maybe just one -- yes.
Sorry, go ahead.
No, no. It's probably another related question. I'll just wait for your answer on that. Yes, sir. My other question was more in terms of your investments into newer technologies. Like while we've indicated that we've been evaluating newer technologies for about 6 to 9 months now, any progress or any update that you think could be meaningful probably over the next 6 to 12 months?
So we've been working not just for 6 to -- last 6 to 9 months. We created a new energy division almost 2 years ago to start working on some of these things. Some parts which you would be seeing in the background already happening are things around like bio CNG where the orders are of the order of INR 40 to INR 50 crores, and we have kind of built up somewhat of a leadership position in the way we are working on municipal solid waste to bio CNG, biomass to bio CNG, getting into more and more things that are biomass-related in very -- in several different ways. So that's one example where not only have we taken a position, but we have kind of started to work down.
In solar, we had said, which is not really new technology, but for us, it was a new area to get into, which was the OpEx solar. We started with solar, then we added wind. Now we are looking at places where we can integrate storage into this as well. And taking a business which was 0 and now kind of getting to 200 megawatts in the next 12 months, we have a fair bit of confidence that we'll have an installed capacity of 200 megawatts in -- yes, this is all homegrown, no M&A, nothing, stuff that we have put together ourselves brick by brick.
So then you come back and say, look, what are other new areas that are possible? Yes, so we've been working on coal gasification for a very, very long, long time. Thermax has been working on coal gasification for maybe more than 6, 7 years. But in the last 2 years, we have now -- and in the last 1 year, we have demonstrated homegrown Indian technology for coal gasification with confidence that if India wanted to work with high-ash coal, our technology was perhaps the best one to look at.
And now we are working to say, look, help us scale up this technology because at Thermax, we can't go take a technology which we have developed and straight go into a INR 2,000 crore project. Yes, we are wanting some set of INR 200 crore to INR 500 crore projects, where we are willing to put some of our own money at risk to showcase this. The government has been talking about VGF funding for coal gasification projects, et cetera, et cetera. But all of that is still just not making its way to the ground, yes, and we would love for some of this to be showcased. So that's an example of new technology that we have been working on.
On hydrogen, we've been working on biomass to hydrogen where we think we are working on areas which are relatively new. We're also looking at partnerships for hydrogen overall to get into some of the newer spaces as well, including electrolyzers, et cetera. Nothing to report right now, but very actively working at least in some of these spaces, looking at carbon capture, looking at various different aspects of what the new world will -- new energy world will require. And as things mature, we'll come back and share more details.
So some that is here and now, some that is pregnant, some that is too early to speak about but where we think we need to invest and not like -- a lot of the questions that you're asking around give me 10% profitability right now, and I'm saying this is not the time to ask for that because we need to be putting in some amount of our money as risk capital in some of these newer areas because without it, we will not be setting the company up for the future and think -- very strongly believe that this is a great time to build a Thermax for the next 20, 30 years, not just the next 2, 3 years.
We have the next question from the line of Charanjit Singh from DSP Mutual Fund.
Sir, first, on the competition side, if you can highlight from the product segment perspective, has the market been growing very significantly and we have improved our market share? And from the project perspective also, how is our hit rate and the competitive intensity in terms of the differential between maybe L1, L2 or the lowest bidder? So if you can touch on those aspects from the competition perspective. That's my first question.
Okay. Fairly competitive across the board. Yes, the kind of products that we provide, our customers have choices, and we are not at all in anything relating to a tech space or anything that would come back and say that we have access to any unique technology, which is not available to anybody at all.
That said, in most of the areas that we operate in, we have at least some sort of a leadership position where we can command some sort of a premium that is based either on the customers trusting us that this complicated solution, Thermax can engineer it better than anybody else or because that the customer has referenced Thermax just from a -- as a partner of trust would be the one that they would look to work with.
And of course, then you have government projects, which are, sure, completely on an L1 basis, where also we have been prepared that below a certain margin, we won't go. And we perhaps walked away from the biggest projects in our history because the margins didn't make sense. So that is an example of where competitiveness is.
Now let me take examples of all the first ones that I spoke about, like in the places where customers trust us to operate from an engineering and a technology basis better than our competitors. So the entire biomass space is something of that sort, biomass, multifuel, waste to energy, all of those. Our competitors can say I can do it as well. But Thermax has about 40% market share across because when the application gets a little difficult, customers prefer to have some peace of mind and will come back and at least give us the last look. The last look may not be worth more than 2% to 3% but at least you get a last look.
In our water business, we are not always having that technology edge. And our ask is to build a technology edge in water, the way some of our other waste-to-energy and our heating and other places have -- and our cooling places, our cooling solutions have.
So that's kind of in places like bio CNG that I mentioned, customers come to us with a clear preference and saying, look, this is the price I will do and look to negotiate with Thermax, but those, we come to it from a position of strength. So that's kind of one bucket.
Second is places where customers trust us to execute the project well and just a partner of choice. We are seeing this in solar. In solar, there is no technology difference. There is -- the difference between us and the next one would be maybe 2 to 3 paisa, yes, where we would be expensive by 2 to 3 paisa relative to the person who is not chosen in a way.
And in many cases, we, too, are not being chosen where the customer says, look, I'll give you a price, but that price then looks like as a 12% to 13% IRR for us, and we walk away from that business. Yes, our minimum threshold has been 15% to 16% on the solar side. We walk away from business.
But many customers, if they are putting their own money into a project, like the idea that there is a Thermax out there, which is managing the 75% and a company that will be rock-solid through the execution phase. And we have got similar examples on like larger waste-to-energy projects. The entire steel industry in a way is a place that we hope to work that way.
TOESL is an area where we have significant market share because customers trust us to manage biomass better than anybody else. Yes, and in India, we have maybe a 90%-plus market share in a TOESL kind of a business, where the tough part for us is to convince a customer to go from coal to biomass or from liquid fuels to biomass. But after that, we don't have as much competition from somebody else just because we have extremely strong execution capability overall.
Where we are focused in as we go forward is to focus really deeply on the services part of our portfolio, bring digital in, bring customers better insights from that digital capability, have AMC capability, rapid spare parts because these are all areas where we think we can grow profitably without really having a competitor to speak of.
And services has been growing for us at above 20%. Last year, it grew 30%. This year also, we expect it to grow. Next year also, we expect it to grow 20%. So we have been able to grow services, which is hopefully more of a repeat kind of a business and grow that profitability -- profitably. And some of that is now showing in our bottom line as well as we go forward.
So a long answer to your question, but I hope I've given you a flavor of at least how we are looking at competitiveness.
Yes, Ashish. That was very helpful. Just last question from my side is on the export market. So what is the contribution from exports right now? And how do you see different markets in terms of -- because of the various concerns which we are seeing in terms of export markets slowing down, are you seeing any specific trends there?
So export markets, long answer again. Some part of our exports markets are -- so by export market, I will say not our international business, which is -- includes Danstoker and PTTI and all that. I'll talk about our export markets and stuff that we make in India and send outside. That portion of our business has been somewhat slow because we haven't seen as many big projects internationally the way we used to see. Yes, certainly, the Dangote kind of projects, even like 3 years ago, when I -- 2.5 years ago when I joined, when I was relatively new, we had a premixed order that was quite nice.
We don't see larger projects of that kind immediately. We are seeing a pickup in activity. We see a fair bit of activity in the INR 50 crore to INR 100 crore projects. And going forward, we see a good pipeline of similar waste-to-energy projects in Southeast Asia, in Africa and other parts. So we like that pipeline overall, but we don't have anything big and dramatic to share internationally either. Where we are seeing good activity, I've spoken to you about.
We are also seeing a few examples of China Plus One showing up in our export side, where global waste-to-energy leaders previously -- and by the way, many waste-to-energy leaders globally have got no manufacturing capability of their own. They work on core engineering, and then they partner. And most of that business was going to Chinese players.
Now we see people coming to India, and we have broken through on a couple of these bigger names on waste to energy globally. And as we execute that project, we are hopeful that they will come to us for more and more repeat business as part of this.
Then the last bit is our chemicals business, which has been doing reasonably well, growing reasonably well, not growing as fast as our higher-end expectations. And that is because a couple of those areas, especially in the U.S., are seeing some amount of slowdown. And it's a little bit of slowdown. We are still very, very bullish. But that team has missed our internal growth projections. It's still growing but not at the higher end of what we expected.
So overall, I think my number would be that we have gone through like the highs of previous times that we have had on exports. We are not there. We should be doing better than where we are right now, but still not any one big-bang project to announce, but continued momentum based on a relatively low base that we are, okay?
Yes, that was very helpful.
We have the next question from the line of Renu Baid from IIFL Securities.
My first question is broadly related to the domestic and the export mix especially on the energy segment of the market as we see. The average -- the run rate of the orders that you're winning in this market has steadily improved from 7 billion to 8 billion to now 1,000 million plus -- INR 1,000 crores plus kind of run rate. So you did mention that now you're seeing a variety of mid and small-sized orders and that momentum remains pretty healthy.
So excluding large orders, in your view, should we be able to sustain a double-digit growth momentum over the INR 1,000 crore run rate? Or you think it is still a mix of mid and large-sized projects which are required to drive growth from here on?
If India CapEx holds with this trend that it has right now and with some of the newer things that we are doing, double digit is something that we would like to see. We are planning -- we are seeing some amount of at least pipeline to -- because a problem with some of the shorter orders is that you can't look too far. A large order, you start working on it maybe even 6 to 9 months before it happens. The smaller stuff, a lot of it is in the mix, but the close rates depend completely on sentiment and overall look. And right now, I would say the sentiment is positive.
Sure. And from your perspective, by when do you expect receipt of some of those mid and large-sized projects from the steel sector? Because they are large and lumpy in terms of size. So from project time lines, by when should those orders accrue to Thermax in terms of order inflows of FY '24, first half, second half, broad time line?
Second half of FY '24.
'24. Got it. Second, on the energy international piece of the business, while in the previous question, you did mention that you have been trying hard in multiple segments, while in the domestic refinery segment, price pressures persisted [ and refrained ], but after Dangote, our credentials and [ pursuit ] with quite a few oil and gas majors have been through. So how are we looking at order prospects in the oil and gas segment especially from Middle East or Africa bucket? And you think there could be something in the city in the next 2 years in terms of project pipeline or it may still take longer on this side?
Look, I think 2 years may be a more reasonable horizon. We do think that we are a lot better or more widely accepted across the board, including like now portions of Latin America as well. There are 2 things going on, yes. The first is right now, there are no big petrochemical projects coming up anywhere in the world, yes, and which is perhaps also a sense of where the world sees its future.
Yes, so even in the Middle East, you're not seeing any new refineries or petrochemical projects specifically coming up. There are quite a few downstream projects that are starting to come in, which brings me to my second point. I think Thermax can do more to establish its credentials in some of the Middle East markets in particular where we are a good name, but we are not a local name, like local entity in Saudi, we don't manufacture out there. And a big chunk of the market -- of the downstream market is actually action is happening in Saudi, where it is acting for local manufacturing, local production, all of those kinds of things.
It is not something that we are deeply involved in. I think we are seeing a good set of projects, but I would agree with you that we are not as local in some of these markets where downstream activity is happening as we should be, and I'm not committing that we are going down that route.
Yes, we are -- our focus has been Southeast Asia, and we put up a big plant in Southeast Asia. Right now, our -- my primary focus in terms of where our money goes is more in new energy. And we don't want to go into putting up a new plant somewhere else internationally and getting that plant to 3 years of stabilization and all that. Our focus is more getting into some of these new energy areas and starting as India as our home.
Got it. Second -- sorry, the other question would be, see, as I look at the chemicals segment, while you have highlighted growth across some of the subcategories in terms of water, oil field, chemicals, how does the mix broadly stand at the end of 9 months or probably at the end of '23? And in your view, if you were close, will the growth be incrementally driven by construction and water segment for us for the next 12, 18 months? And will that also have an impact on the margin mix that we have had?
I would say, overall, on chemicals at least, we continue to be quite bullish, yes, and we are focusing on double-digit profitable growth again. And we will continue to look at capacity additions, adding new segments, new technologies, new capabilities. So we are preparing internally for a much longer investment cycle in chemicals with continued reasonable profitable growth, which means -- and by reasonable profitability, I mean this teens profitability and good growth but with investments and for a much longer period than just 3 to 6 months. I mean we are preparing for a 3- to 5-year cycle on chemicals.
[Operator Instructions] We have the next question from the line of Bhavin Vithlani from SBI Mutual Fund.
Good performance on the profitability, Ashish. So 2 questions from my side. If you could just help us, within the energy, we have the so-called BB boiler business and the chiller business. If you could help us understand underlying growth trends of this business in the 9 months and the kind of growth that we are seeing, how profitable are these? That's the question one.
And second is, what has been our losses in our international subs? And a trend line of how do we see -- that would be useful to understand. These are my 2 questions.
I'll take your second question first. I think that's an easier one to answer. Both our -- I'll give you direct answers on both. On international, I think we had, I would say, a trend which has been now going on for 6 months where we see a better visibility and improved numbers. We do expect both our international subsidiaries, which is Danstoker and PTTI, which are manufacturing subsidiaries, to be in aggregate profitable for the next 12 months, maybe even the next 15 months of which we have visibility, and both individually to be profitable as well, which is a change from where we have been in the past and doing that with some amount of consistency.
So PTTI, I would expect 4 out of the next 5 quarters, they should be breaking even. Similarly, Danstoker, 4 out of the next 5 quarters, they may be breaking even, 1 quarter here or there because they're both somewhat close to the edge in the 2% to 6% profitability range. Maybe you may have one negative surprise here or there, but [indiscernible], I think they should be -- both be okay for the next 12 to 15 months, which is much better than where they have been for any length of period. And we have been seeing that order buildup and some strength for the last 6 months, that is what -- last 2 quarters. And that is what gives us this confidence overall. I think that's my answer on your second question.
On your first question, historically, our cooling business has been, within our product business, our most profitable business, which is not the case right now. Its profitability has come down from high teens to mid-teens and even kind of edging to the boundary of coming to double digits and not being a teens profitability. And that's been driven by -- and I'm talking about EBITDA. Yes, there is a depreciation impact on that business, which pulls it down even sooner -- even lower.
But that is driven by 2 things on our cooling business. One is that commodity prices, it's -- the primary chemical that goes into this is lithium bromide, and lithium prices have gone up like 4x, literally 4x. Lithium bromide prices have gone up 4x. So that has created a lot of pressure on our cooling business. They have done a lot of cost-out. But even with that, margins have fallen because we are working in a competitive space overall.
The second thing that has happened is the mix within cooling has changed, where a couple of applications that were driving our cooling business, those applications under the new energy world are no longer of interest to our customers where the customers would do gas-fired engines and take the waste heat from those gas-fired engines to drive our chillers, to drive chillers through our capabilities. So those gas-fired engines market itself is going down and -- which is the cogen market. And so our need for our chillers is also going down. So it is being affected. Overall, this has been our -- the area where we have grown the least.
That said, cooling long term, we are very excited about because India will need cooling solutions and industrial cooling solutions for the next 50 years. So we need to branch out into some of the other areas and build up our cooling business. And our focus over the next 3 years is going to be to build out our cooling business and get back into an aggressive growth mode. But for that, we will have to invest a bit in this business as well.
On the other side, in our heating business, which is our small boilers business, we have been doing incredibly well. We have been keeping our market share at 40% kind of a number holding on to our prices, improving our profitability, thereabouts. And in this kind of space, we have been holding on our own, which has somewhat been reflecting in our TOESL business also having extremely high market share. And here, our profitability has been improving as well. So our blended profitability number has stayed about the same, but cooling has been coming down in profitability. Our heating business has been going up in profitability.
We have the next question from the line of Amit Anwani from Prabhudas Lilladher.
My question is on the FGD. You already highlighted that, that depends on the threshold. Just wanted to understand, how much is the FGD order book? And how are we seeing the revenue booking coming in 4Q and FY '24?
Rajendran, do you want to take this question?
Did I get you right in terms of what's the revenue recognition on the FGD side?
Yes, sir.
And the number that we expect for '24, yes, based on the backlog.
Sure. So I think, Amit, roughly the revenue recognition would hover between INR 500 crores to INR 600 crores for the full year during this year in FY '23 and in FY '24 as well.
Sure. Sir, I just wanted to also understand, in our book, how much would be the base order and how much would be the proportion of large orders? And what is the duration -- average duration of the large orders?
Talking specific to FGD or overall year?
Overall year, yes, overall book.
Okay. So I don't think, Amit, we would have any sense of the way that you are asking. We have backed a few couple of -- in the last 1, 2 years, we've highlighted to you a couple of large orders that we have won, the FGD one as well as a sulfur recovery block order that we had won. So I think a couple of orders are there, which are large in the INR 500 crore, INR 2,000 crore range, which we have disclosed in the last 1 to 2 years.
However, having said that, in the last 2, 3 quarters, you would notice that we have not reported out any large orders of that price, neither in the FGD nor in the other businesses. So I think you should note that the large order businesses are obviously with the execution coming down and orders of the regular sizes are the ones which we will be looking going ahead.
Sure. My last question is on the pipeline. We mentioned that there's some moderation seen on the refinery petchem kind of large orders. On the other hand, we are seeing the oil and gas companies continuously doing CapEx. So any specific thing we would like to highlight why we are seeing the pipeline moderating on the oil and gas petchem side?
Sorry, could you repeat? I think you lost -- I lost you at the end. You talked about oil and gas and refinery...
So I just wanted to understand why are we seeing moderate order pipeline from...
Completely, you can take a look. India Reliance has stopped announcing any new projects on oil and gas and refining for all practical -- and it is not that. We are not doing it. We do a lot of service work. We do a lot of smaller, which are upgradations, brownfield projects, service opportunities. We do have a lot of that.
What has stopped is the new refineries that are -- so India announced the HRRL refinery, which is the one in Barmer in Rajasthan. And after that, there hasn't been any new refinery announcement. There's talk that the Bina Refinery will get -- will start again, and whenever the projects come for Bina Refinery, if and when they come, we will show that in our pipeline again.
But it's completely driven by a cycle here. When COVID was going on, a lot of the backlog on those large projects was accumulating. In the second year of COVID, a lot of those projects got released and closed out. But now we don't see as much new activity. I think if we wait a couple of years, that new activity will come back. I do understand like Nayara is planning a big investment. HMEL is planning a big investment. The Bina Refinery is looking to get accelerated again, but yes, not in the next 12 months. Yes, so I think the action may move 12 months plus from now.
Sure. Last question if I may squeeze in. On the MOUs, which we used to talk about in last year with Power Roll on solar films and air independent propulsion system for some names. Any update you would like to share on this?
So I think Power Roll was a very, very small MOU, and that is 15, 18 months ago. I don't think -- while we look to watch that space closely, I don't think there is anything imminent that can come from that. The independent air propulsion systems is something that we continue to work closely with the Navy on. We expect continuous order supply from the Navy for these systems.
Yes, it's been very tough to understand that when the Navy comes in sales, look at all these 100 submarines to -- 100 units of this that I need, why would they not place orders? And we have been having a tough time running the plants, just waiting on orders from the Navy because it just goes through this very difficult ordering cycle within.
So we have reached a point that we have said we can't run losses anymore, and we will only execute even a single order if we have visibility into continuous long-term order book from Navy. We are very hopeful of making this come true because we have worked for years on this, and there's nobody else who can do this in India or even otherwise.
So we are very hopeful that we will reach a point of consensus. We are close, but we are not there yet. Yes, so that is on that second one. What else did we announce as MOUs?
I think that's about it, sir.
Exactly. So otherwise, I think we are quite active on many of the waste-to-energy things that we announced, the EverEnviro one that we announced. There are quite a few others that we continue to be extremely active on. Thank you.
That was the last question. I would now like to hand it over to Ms. Bhoomika for closing comments.
Yes. I would like to thank Mr. Bhandari and Mr. Arunachalam for answering all the queries and giving us an opportunity to host the call as also all the participants. So wishing you all the very best. Any closing remarks from your end?
No, nothing from our side. Thank you very much for your time.
Thank you, sir.
Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.