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Last Updated : Apr 20, 2018 02:43 PM IST | Source: Moneycontrol.com

Buy VA Tech Wabag: Akash Jain

"It is our top pick in water management space. We are bullish on a longer term basis 3-5 years. At current market price of Rs 533 it is attractively priced at a P/E of 17x on EPS on trailing twelve month basis," says Akash Jain, Vice-president, Equity Research at Ajcon Global Services.

 
 
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Akash Jain

VA Tech Wabag, a leading Indian multinational company having presence in water and wastewater treatment sector. The company has presence in over 15 countries. It along with its 17 subsidiaries provides EPC and O&M solutions to municipal and industrial clients.

It is our top pick in water management space. We are bullish on a longer term basis 3-5 years. At current market price of Rs 533 it is attractively priced at a P/E of 17x on EPS on trailing twelve month basis.

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The Company is a major beneficiary of Namami Gange scheme introduced by Government of India to bring life to river Ganga and rejuvenate it. It boasts commands 14 percent market share in this sunrise sector of India. In addition, well positioned in Europe, Middle East, Africa and South-East Asia. It received prestigious orders recently which are as follows;

Namami Gange scheme:- Rs 147 crore by Bihar Urban Infrastructure Development Corporation Ltd, under Namami Gange scheme (National Mission for Clean Ganga — NMCG) towards design, build and operate 60 MLD Sewage Treatment Plant at Pa hari, Patna

Kolkata Metropolitan Development Authority:- Repeat order for Rs 83 crore towards design, build and operation of 124 MLD Water Treatment Plant (WTP) at Rajpur-Sonarpur in Kolkata from Kolkata Metropolitan Development Authority. The project has been awarded under the AMRUT scheme and includes operation and maintenance of 12 months

HPCL - Mittal Energy Limited (`HMEL'):- Secured an order worth Rs 290 crore from HPCL — Mittal Energy Limited towards design and build of Effluent Treatment Plant at Guru Gobindh Singh Refinery, Bathinda, Punjab

The company witnessed strong set of results in Q4FY18 and we believe this trend will continue for next 2 years although there might be ups and downs quarterly basis. In Q4FY18, the Company’s topline witnessed YoY growth of 20 percent aided by execution progress in its large projects.

Good contribution to EBITDA was witnessed from its overseas subsidiaries and IIUs. TCO is under control driven by reduction in Europe. The repatriation from profitable project execution in MEA resulted in dividend income for the company. On a standalone basis, the increase in finance cost is mainly due to higher bank charges associated with execution and new projects.

The company is generating RoCE and RoE in the range of 22-25 percent and 16-17 percent respectively consistently and with healthy cash generation from operations, the net cash is likely to remain positive.

We would not be surprised if it becomes 3x from current market price in 3-5 years provided that it executes its overseas and domestic projects on timely basis and geopolitical factors do not act as a hindrance to its execution.

Disclaimer: The author is Vice-president, Equity Research at Ajcon Global Services. The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Apr 20, 2018 02:17 pm
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