Buy Va Tech Wabag; target of Rs 1100: Sharekhan

Sharekhan's research report on Va Tech Wabag

Va Tech Wabag’s adjusted profit decreased 10% y-o-y to Rs. 72 crore due to higher interest expenses. Revenue of Rs. 934 crore was up 0.8% y-o-y and OPM stood at 12.4%, up 40bps y-o-y. Order backlog stands strong at Rs. 11,400 crore and order pipeline is promising across Middle East, Africa, CIS nations, and SE Asian countries. The company has submitted bids worth $1bn in Middle East. Va Tech’s focus on technologically advanced EP projects, industrial and international projects, and increasing share of O&M contracts would improve margins, cash flows, and working capital cycle. Company has guided for a revenue growth CAGR of 15% and margin guidance of 13-15% for the next 3-5 years.

Outlook

We maintain BUY with a revised PT of Rs. 1,100, given its strong order inflow, promising pipeline, and margin tailwinds. The stock trades at an attractive P/E of ~15x its FY2026E EPS.