Accumulate VA Tech Wabag target of Rs 385: Geojit

Geojit's research report on VA Tech Wabag

VA Tech Wabag Ltd is a Chennai based Multinational, providing solutions on water recycling and reuse for municipal and corporate clients. Q2FY22 revenue grew by 12% YoY aided by strong execution in domestic EPC and international O&M operations. Despite higher RM costs, EBITDA margin improved by 116bps YoY to 8.3% due to pick up in execution & project mix. The management maintained its FY22 EBITDA margin of 10% to 11% as most of the projects have a price escalation clause. Order book remain strong at Rs.10,040cr (3.2x TTM revenue) which provides strong visibility for the next two to three years. The company expects H2FY22 performance will be better with a pick up in order inflows and execution.

Outlook

Given the healthy order book and increasing demand for water related projects we maintain our Accumulate rating and value the stock at a PE of 13x on FY23E earnings with a target price of Rs.385.

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