Accumulate VA Tech Wabag Ltd For Target Rs. 1,571 By Geojit Financial Services Ltd
Strong prospects to drive orderbook expansion
VA Tech Wabag (VATW), is a Chennai-based multinational company specialising in water technology. With its expertise in the turnkey execution and operation of water and wastewater treatment plants, the company primarily serves both municipal and industrial sectors, focusing on providing comprehensive solutions for water-related challenges.
* Q3FY25 revenue stood at Rs.811cr., registering 15.1% YoY growth driven by EPC municipal/O&M Municipal/O&M industrial segments. With this the 9Mrevenues are at Rs.2,198cr.(11.2%YoY).
* Strong order intake of Rs.2,781.3cr. In this quarter with notable inflow in O&M industrial segment. Order intake for 9MFY25 is at Rs.5,075cr. Registering 188.1% YoY growth.
* Revenue visibility remains strong with the current orderbook at Rs.13,103cr. (excluding framework contracts) , implying 4.6XTTM revenue.
* O&M contribution to revenue mix increased by 263bps, contributing about 19% of the total revenues, in-line with VATW’s envisioned strategy.
* However, higher cost of sales impacted margins which came in lower than expectations. Gross/EBITDA margins registered 202/166bps contraction while PAT registered 23bps contraction, as margin contraction was partially offset by higher other income.
Outlook & Valuation
Order inflows are expected to remain robust with international orders gaining prominence as VATW looks to expand its presence in emerging markets. Strong executions will continue, unlocking 18%CAGR growth in topline as they execute their orderbook. We expect EBITDA margins to expand by 128bps in FY25E-27E period, thereby leading to over 24% EBITDA growth. PAT is expected to grow at 23%CAGR in this period leading to 144bps ROE expansion to 16%. Therefore, we value the stock at 22.5XFY27EPS of Rs.69.8 to set a target price of Rs.1,571 and upgrade to ACCUMULATE rating.
*over or under performance to benchmark index
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SEBI Registration Number: INH200000345
