VA Tech Wabag:
Shares of VA Tech Wabag hit a three-month high of Rs 358 as they traded 7 per cent higher on the BSE in intra-day trade on Thursday. The stock was trading at its highest level since December 19, 2022. In comparison, the S&P BSE Sensex was down 0.10 per cent at 58,148 at 10:53 am.
In the last one week, the stock has rallied 12 per cent in the market after the company bagged Rs 800 crore design, build and operate (DBO) order in Bangladesh, fully funded by the World Bank and AIIB . The company had said that its scope included design, engineering, supply, construction, installation and commissioning of the 200 MLD STP, followed by operation and maintenance (O&M) for a period of 60 months.
The company said the project has the potential to be expanded to 600 MLD in future, keeping in view the growing needs of the city.
VA Tech Wabag is one of the experienced players with a strong presence of more than 25 years, engaged in Water Technology, and through engineering, procurement and construction (EPC) services, O&M services, research and development, manufacturing, Provides customized water treatment solutions. and commissioning.
The company is a major player executing more than 1,450 plants, which include more than 450 sewage treatment plants and more than 320 water treatment plants. The company’s order-book is well diversified in various segments of municipal and industrial projects, it has a worldwide presence in different continents.
The company’s order inflow during the first nine months of the current financial crisis (9MFY23) stood at around Rs 1,885 crore, taking the total order-book value to Rs 10,037 crore as on 22 December. HDFC Securities analyst said the company has a strong bid pipeline, and has emerged as one of the lowest bidders for several projects and is expecting orders worth around Rs 5,000 crore by April-May 2023 .
Industrial orders comprise 29 per cent of the order book, while municipal orders constitute 71 per cent of the total order book. The brokerage firm said Wabag has gradually increased its share in the operation and maintenance business segment, which now contributes 37 per cent to its existing orderbook, which is expected to generate better margins than the EPC segment.
Wabag is also diversifying its business by entering Zero Liquid Discharge (ZLD), which is expected to see steady growth over the years as authorities tighten discharge monitoring and controls. We remain positive on the stock due to its healthy order book, strong execution capability, robust order pipeline, stable EBITDA margin and positive expectation from the government’s budget allocation, the brokerage firm said in the report.
“We are bullish on the strong long-term outlook and revenue growth in the coming years for Wabag. We expect the Revenue/EBITDA/PAT to grow at a CAGR of 10 percent/15.2 percent/20.9 percent over FY2012-25E. We think It is assumed that the stock has a base case fair value of Rs 367 (10x Dec24E EPS) and a bull case fair value of Rs 401 (11x Dec24E EPS) over the next three quarters. Investors can buy the stock in the band of Rs 333-338 (9.2x Dec24E EPS) ) and add more on dips at Rs 295-299 band (8.2x Dec24E EPS),” the analyst said in a March 20, 2023 report.
