IGI Logo

Leader bouncing back

REASONS TO BUY THE STOCK

VA Tech Wabag (VATW) is one of the leading multinational companies into water and wastewater treatment space, largely focused on providing EPC and O&M solutions across the globe. Its vast project design, execution & operation experience, superior proprietary technology to provide customized solutions, & professional management team with proven competence have enabled it to command a healthy market share in water, sewage and waste management segments. We initiate coverage on VATW with a BUY recommendation for a price target of Rs391.

VATW is one of the leading companies in pure play water technology across the world offering complete range of value chain services with focus on conservation, optimization, recycle and reuse of water to the extent possible. It has achieved a healthy 30‐35% bid‐ hit ratio globally as well as domestically on the strength of its whole range of competitive and customized value chain services. Having successfully executed 6000+ projects across the globe, it was ranked 4th globally by GWI in 2021 for ensuring safe drinking water and clean environment.

VATW has a proven track record of bagging large and complex projects; as on Dec‘21, its order book stands at ~Rs100bn implying an order book‐to‐bill ratio of 3.3x trailing revenues, which provides revenue visibility for the next couple of years. All its major projects are covered with price variation clauses helping VATW maintain its profitability going forward.

The company’s management commands a rich and varied experience of more than three decades in the water industry. The unique mix of talented professionals comprising engineers & water experts define company’s technical competencies to keep pace with the evolving customer needs & market conditions, thereby fetching repeated orders from its existing clients.

The company’s focus on innovation and R&D has helped register 10+ technologies and 90+ IP rights enabling to bid for projects at competitive rates with ensuring quality, efficiency and timely delivery. Further, VATW’s ability to manage and execute large and complex projects on time through use of superior technology have helped improve its technical qualification and can bid for large project worth Rs10bn plus (only few players) on standalone basis giving an edge over most of its peers

Given the growing attention of the government and multi‐ lateral funding agencies towards an escalating water shortage crisis, the water treatment sector is well poised for a secular, long‐term growth. In our view, VATW’s robust order book thriving on strong market leadership, execution ramp up, operational efficiencies would help it capitalize on the forthcoming opportunities. At CMP, the stock trades at a P/E of 15.2x/ 13.2x/ 10.9x on FY22/23/24 earnings estimates.

Key Risks: 1) Change in government policy given that a major chunk of the order book are municipal clients, 2) industrial slowdown could impact new order inflow, and 3) foreign exchange volatility.

To Read Complete Report & Disclaimer Click Here

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632

Above views are of the author and not of the website kindly read disclaimer