Accumulate Va Tech Wabag; target of Rs 1766: KRChoksey

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26 Aug, 2025 12:21

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KRChoksey`s research report on Va Tech Wabag“Wabag reported revenue of Rs. 506 crore (8.9%, YoY) below our expectation of Rs. 556 crore which is contributed by domestic sales & overseas sales Rs. 236 crore and Rs. 270 crore respectively. Wabag reported EBITDA of Rs. 36.7 crore (-2.46%, YoY, domestic Rs. 23.6 crore & overseas Rs. 13.1 crore) and margins fell by 84 bps due to low contribution from overseas market. However, overseas margins have fallen to 4.9% due to high provisioning (Rs. 5 crore) against receivables. Wabag reported increase in working capital days from 45 days to 72 days in FY14. Management has intact their guidance Rs 26-27bn revenue & similar EBITDA margins & Rs. 32-34bn order inflow for full year FY15E. Order inflow guidance is flat due high base and order activities which will pick in 2HFY15.""Wabag reported Rs. 700 crore order inflow and order backlog stood at Rs. 53.0 bn at the end of Q2FYFY15. Breakup of Order backlog, Rs. 27.38 bn & Rs. 25.0 bn from domestic and international market respectively. Considering higher proportion of domestic order, we can expect improvement in operating profit. Management looks for forthcoming opportunities in new geographies like Philippines, ME, China, Spain & Turkey and municipal sides in domestic market (JICA & WB funding projects). Overseas segment reported Rs. 13.1 crore EBITDA (4.9% margins) are below expectations due to rs 5 crore provision against receivables. Wabag enjoys domestic & overseas operating margins 11.5% & 7.5% respectively. We believe increase in domestic contribution will help to improve the operating profit in coming years.""At CMP Rs. 1,574 the stock trades at 16.2x & 12.8x for FY15E & FY16E respectively. We used EV/ EBITDA methodology to value Wabag, assign 16.0x (Rs. 216 crore, FY16E) to domestic business at par with domestic peers and 10.0x (Rs. 92 crore, FY16E) to overseas business and derived a TP of Rs. 1,766 with an upside potential of 12.2%,” says KRChoksey research report.   

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