Due to the recent improvement in Va Tech Wabag shares (around 15% in the past one month) and healthy orderbook, domestic brokerage and research firm ICICI Securities has upgraded the rating of Va Tech from Add to Buy with a revised target price. 337 each.
In the FY23 budget, there is an increased allocation of Rs 600bn for the Jal Jeevan Mission. The tender for Namami Gange Phase-2 is expected soon. Additionally, as ESG regulations tighten and demand for water-related projects pick up, industrial order flows are expected to pick up, highlighted the brokerage.
“The company has developed a strong niche in the water treatment segment for industrial and government funded schemes in the domestic and international markets, where the order pipeline remains strong. Hence, continuing with healthy order-taking prospects and benign valuations, We upgrade the stock to Buy,” the note said.
VA Tech Wabag’s (VA Tech) revenue declined 10.7% YoY in Q4FY22 due to a 10% year-over-year decline in EPC revenue. Gross margin expanded, however, higher overhead costs limited EBITDA margin expansion.
EBITDA and APAT also declined, however, order volume was strong 8 billion/ 36 billion during Q4FY22/FY22. This led to a strong orderbook of 101 billion, of which 65% is for EPC contracts. The company has provided 600 million towards pending receivables from Gencos. Meanwhile, Chennai 400MLD desalination bids are nearing completion and are expected to be awarded in FY23.
ICICI Securities said the management is focusing on more engineering and equipment supply orders and bidding for multilaterally funded international projects, to support margin and cashflow growth.
Indian veteran investors and stock market traders, as per the latest shareholding pattern on BSE Rakesh JhunjhunwalaRekha Jhunjhunwala’s wife Rekha Jhunjhunwala holds 8.04% stake in the water purification company as on March 31, 2022.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.