Buy WPIL Ltd for the Target Rs 550 by Emkay Global Financial Services Ltd
WPIL reported a weak 2QFY27 performance with a miss on our expectations – consolidated revenue/EBITDA came in at Rs3.5bn/Rs472mn, declining 17%/41% yoy. EBITDA margin declined by 550bps yoy at 13.3%. Products revenue at Rs2.1bn (-14.7% yoy) and Projects revenue at Rs1.4bn (-19.9% yoy). The subdued performance in the products division was due to deferral of large orders which is expected to normalize in 2H. Projects division saw lumpiness in revenue booking on the international front and slower execution of JJM orders on the domestic front. Order backlog at end-2QFY27 stands at Rs51bn (47:53 mix between domestic and international). Despite the weak operating performance, NWC days improved by 21 days to 217, while cash flow from operations improved to Rs1.1bn in 1HFY27 (vs -Rs986mn in 1HFY26). We revise down our revenue/PAT estimates on average by 17%/26% over FY26- 29. We maintain BUY on WPIL, while cutting our TP by ~15% to Rs550 from Rs650, based on 20x Sep-28E EPS.
Products division – Strong demand traction from power sector and MENA region
The Products division reported revenue of Rs2.1bn in 2QFY27 (-14.7% yoy; Emkay: Rs2.7bn). Domestic revenue declined 28.6% yoy to Rs617mn, impacted by dispatch deferments amid heavy monsoons; Management expects dispatches to normalize in 2HFY27. International revenue declined 7.2% yoy to Rs1.5bn. EBIT margin moderated to 16.3% from 27.5% in 2QFY26, largely due to execution of high-margin orders in the base quarter. Management expects margins to normalize at 22-25% (1HFY27: 24.3%). The division's order backlog stood at Rs10.3bn, providing healthy revenue visibility. Management expects strong domestic ordering from the power sector, while a large Kuwait water supply order could support international order inflows.
Projects division – Pickup expected in 2H
The Projects division reported revenue of Rs1.4bn in 2QFY27 (-19.9% yoy; Emkay: Rs3bn), impacted by lumpiness in international revenue booking, with revenue at Rs862mn (vs Rs2.2bn in 1QFY27). Domestic revenue was subdued at Rs565mn (-36.2% YoY), primarily due to slower execution of JJM projects. EBIT margin improved to 17.4% from 14.9% in 2QFY26. The division's order backlog stood at Rs40.8bn, providing healthy medium-term revenue visibility. Management expects domestic execution and O&M revenue to pick up following JJM payment releases in 2H and project commissioning. Internationally, Misa (Italy) has completed its legacy projects and secured healthy orders, while repeat orders in South Africa should support an execution pickup in 2HFY27.
View and valuations
Due to lumpiness and subdued performance in the projects business, we cut our revenue/PAT estimates by 17%/26% on average over FY26-29E. Consequently, we cut our TP by 15% from Rs650 to Rs550 (20x Sep-28E EPS). We maintain BUY on the stock.
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH0000003
