Ventura is bullish on Va Tech Wabag and has recommended buy rating on the stock in its February 12, 2013 research report.
“VA Tech Wabag reported a topline growth of 20.8percent on YoY basis in Q3FY13 to Rs 354 crore as against Rs 293.1 crore in Q3FY12 led by timely execution of on-going projects. Topline could have been higher (~4-5 million Euro) had it not been for execution delay in certain orders (Iran and Tunisia). As a result, EBITDA of the company was higher by just 7.3percent YoY to Rs 22.3 crore in Q3FY13 from Rs 20.8 crore in Q3FY12. On YoY basis, EBITDA margins contracted by 70bps. Due to execution delay consolidated PAT declined by 5.6percent on YoY basis and came in Rs 10 crore. Revenues from standalone business were at Rs 226.3 crore (+20.2percent YoY) on faster execution of domestic projects. EBITDA came in Rs 26.2 crore (+23percent YoY) while the margin expanded by 14 bps on YoY basis to 11.64percent. As result, PAT increased by 30percent on YoY basis to Rs 16.9 crore.”
“Order book of the company as Q3FY13 stands at Rs 4269.2 crore which is 2.5x FY13 sales. The EPC order book comprises 66percent of current order book while remaining (34percent being O &M). Stand alone business comprises 67percent of current order book. Order inflow during the quarter was a healthy Rs. 598 crore. The key orders received by the company included Rs 217 crore order from Bangalore water Supply (EPC component- Rs 194 crore, rest O &M), Order from Switzerland (Euro 6 million), Order from Kolkata Metro Development Authority for 140 MLD water treatment plant (Rs 75 crore) and Industrial orders worth Rs 89 crores (Damodar Valley Corporation, NCC and BIDCO).”
“Execution miss in the international order (Iran and Tunisia), marginally contraction in consolidated EBITDA margin, robust standalone business and healthy order intake of Rs598 crores were the key highlights of VA Tech Wabag Q3FY13 results. A quarterly blip would not change our bullish stance on the company since water spends in domestic and international markets are only going to increase. VA Tech Wabag with its large order book of Rs 4269.2 crore and low debt equity of ~0.3x is expected to outperform the industry. Owing to revenue visibility (2.5x FY13 revenues), we expect the revenues to grow at a CAGR of 13.1percent to Rs 2089.4 crore over the forecast period of FY13-15. At a CMP of Rs 523, VA Tech Wabag is trading at 12.7x and 10.6x its estimated earnings for FY14 and FY15 and we reiterate a BUY with the price target of Rs 695 (target 14.0x FY15 EPS) representing a potential upside of 32percent,” says Ventura research report.
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