Published on 13/11/2017 4:08:31 PM | Source: Kotak Securities Ltd
Buy VA Tech Wabag Ltd For Target Rs.711.00 - Kotak Sec
VA Tech Wabag’s (VAW) reported good set of numbers in the second quarter on an operational basis. Profit and EBITDA Numbers were ahead of our expectations. The stock has underperformed in recent quarters due to increasing working capital intensity which has raised net borrowings.
We have been positive on the stock in view strong order book of the company coupled with relative under-performance in stock price in H1FY18. Valuations are attractive relative to peers. Reiterate “BUY” with an unchanged price target of Rs 711.
Valuation – Maintain BUY
VAW is trading at 17.7x and 15.6x, FY18 and FY19 earnings respectively. We have been positive on the stock in view strong order book of the company coupled with relative under-performance in stock price in H1FY18. We also have a favourable sector view on the water and sewage treatment sector on account long term drivers like urbanization, smart cities, water reclamation, industrial effluent treatment and Namami Gange. We maintain “BUY” with an unchanged price target of Rs 711 (19x FY19 earnings).
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