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Antony Waste Handling Cell Ltd (ANTONY), incorporated in 2001, presents a unique opportunity to participate in the fledgeling waste management market. The Indian municipal waste management market is worth INR 50,000 cr and is expected to grow at a CAGR of 13-14% over the period FY21-25 driven by:

* Increasing urbanization on account of the Smart City Mission and AMRUT, which are aiming to develop city infrastructure to improve quality of life,

* Improved awareness of modern methods of waste collection and processing,

* Government’s thrust on hygiene and sanitation as part of the Swachh Bharat Mission,

* Favourable policies leading to increased participation from the private sector.

Given the increasing ESG compliance, we believe that ANTONY, which is a pure play on the environmental aspect, is well positioned to benefit from increasing fund allocations. We initiate coverage on ANTONY with a BUY for a target price of INR 638 (18X FY24 P/E), representing a potential upside of 104% over the next 24 months. We believe that there exists a strong upside risk to our estimates from a re-rating of the valuations given that:

* Unlike other B2G (business to government) contracts, waste management is part of the essential services of any municipal organization and hence gets priority in disbursements leading to lower receivables days.

* Contracts are of a long-term tenure (2-10 years) and hence, provide for strong revenue visibility besides ensuring high return on capital over a sustained period of time.

* Mumbai turnkey municipal solid waste (MSW) processing projects is for the period of 26 years.

* Lack of adequate ESG opportunities will lead to a scarcity premium in the medium term

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