Buy Va Tech Wabag; target of Rs 2100: Sharekhan

Sharekhan's research report on Va Tech Wabag

Va Tech Wabag’s adjusted net profit increased 27.8% y-o-y to Rs. 70 crore. Revenue of Rs. 700 crore grew 5.3% y-o-y and OPM stood at 13.4%, up 42 bps y-o-y. Order backlog stands strong at Rs. 14,604 crore and order pipeline is promising across Middle East, Africa, CIS nations, and SE Asian countries. The company is the preferred bidder for Rs. 3,500 crore worth of projects. 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. 2,100, given its strong order inflow, promising pipeline, and margin tailwinds. The stock trades at a P/E of ~25.4x/21.3x its FY26E/27E EPS.