Buy Va Tech Wabag; target Rs 649: SKP Securities
SKP Securities is bullish on Va Tech Wabag (WABAG) and has recommended buy rating on the stock with a target price of Rs 649 in its June 26, 2013 research report.
June 27, 2013 / 13:50 IST
SKP Securities' report Va Tech Wabag (WABAG)
"Va Tech Wabag's topline grew by 12 percent to Rs 16.2 bn during FY13 on the back of strong order execution in international markets. The Company has witnessed 27 percent growth from the international businesses, with the contribution of Rs 5.5 bn. We expect the revenues of the company to grow with a CAGR of around 14 percent on the healthy order backlog of Rs 42.8 bn. The order book is 2.6x of FY13 revenues. The order book of the company has grown with a CAGR of 15 percent between FY10-13. 66 percent of the order books comprise EPC Contracts and rest is O&M contracts. Of the international order book, about 51 percent is from Austria, 16 percent from Switzerland, 12 percent from Romania, 10 percent from Philippines, 7 percent from Czech, and balance are others. Order intake of WABAG during FY13 was Rs 24.9 bn which saw the rise of 35 percent over last year.""Another positive for the company during the year was that average ticket size of the orders increased by 52 percent during the year. Now the average order size of the company is about Rs 1.2 bn vis-à-vis Rs 800 mn last year. WABAG has received ETP order from Reliance Industries worth Rs 2.7 bn, Bangalore WTP worth Rs 2.19 bn and Philippines WTP worth Rs 1.3 bn last year. The Company has also received order with ticket size of Rs 3.25 bn from Orissa Water Supply & Sewage board and Rs 2.62 bn orders from Nepal during Q1FY14.""WABAG is in the process of decentralizing low-cost operations from the highcost centralized operations model. The Company is moving its operations to low cost countries like Philippines and Turkey from high cost country such as Austria. The fruits of this shift will kick in over the years. The debt equity ratio of the remains low at 0.1x during FY13 due to its unique outsourcing business model. WABAG have a long term debt of just Rs 26.1 mn in its books ending March 2013.""At the CMP of Rs 464, the stock is trading at the P/E of 11.9x and 10.1x of its FY14E and FY15E earnings. We recommend BUY rating on the stock based on discounted free cash flow approach with a target price of Rs 649/- (40 percent upside) in 12 months," says SKP Securities research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies 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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