Top Conviction Ideas : Buy VA Tech Wabag Ltd for Target Rs. 1,930 - Axis Securities Ltd
Recommendation Rationale
* Robust Execution and Order Pipeline to Fuel H2FY26 Growth: Wabag delivered a 19% YoY growth in revenue for Q2FY26. Revenue recognition is typically skewed towards the second half of the year, indicating strong H2. The management mentioned that margins may vary every quarter, while the medium-term margin outlook remains intact.
* Healthy Order Wins Underpin Growth Prospects: During H1FY26, the company secured fresh order inflows of ~Rs 3,477 Cr, ending the quarter with a diversified order book of ~Rs 16,020 Cr (including framework agreements), translating to over 4x its annual revenue. Additionally, it is the preferred bidder for orders worth over Rs 3,000 Cr, which are expected to materialise in the coming months.
* Entering the Sunrise Sectors: Notable wins during the quarter include a CBG production project under the BOT model in Uttar Pradesh and UPW, ETP & ZLD orders for Renewsys Solar’s Hyderabad facility, marking a strategic foray into the Future Energy Solutions vertical. These new sectors hold a high growth potential and can open up a whole new set of opportunities for the company.
* Valuation & Recommendation: We believe the order book remains healthy and have a positive long-term view on the stock. Accordingly, we continue to value the stock at 21x Sept’27E with a target price of Rs 1,930/share, recommending a BUY rating on the stock.
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