VA Tech Wabags (VA Tech) Revenue declined 6% YoY to 7.5bn in Q3FY22 due to a 7% YoY decline in the EPC segment. However, due to better execution mix of industrial and overseas orders, the company was able to improve operating margins despite increased input cost, domestic brokerage house ICICI Securities highlighted.
Considering the healthy 9MFY22 performance and strong orderbook, the brokerage has upgraded its rating on the stock to add from hold and revised the target price. 366 (before 365).
“In the recent budget, the allocation for Jal Jeevan Mission was increased to Rs 600 billion, while the Namami Ganga Phase-II is expected to be tendered soon. Additionally, as ESG norms tighten and demand for water-related projects picks up, we expect industrial order flows to pick up. The company has developed a strong niche in the water treatment segment for both industrial and central government-centric projects,” ICICI Securities said.
The company’s gross margin expanded 280 bps year-on-year, leading to a 140 bps year-on-year EBITDA margin of 10.2%. EBITDA and PAT grew 8.6% and 9% YoY, respectively. Orderbook is strong 100 billion led by strong order intake of 9.6 billion during the quarter.
Although the orderbook is down from its FY20 peak, management is focusing on bidding for more engineering and equipment supply orders. Chennai 400-MLD desalination bids are nearing completion and may be awarded in Q2FY23, the note said.
As per the BSE shareholding pattern, Rekha Jhunjhunwala, wife of ace investor Rakesh Jhunjhunwala, holds 8.04% stake in the water treatment company as of the December 2021 quarter.
The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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