Buy VA Tech Wabag; target of Rs 1900: Motilal Oswal

buy

Motilal Oswal's research report on VA Tech Wabag

VA Tech Wabag (VATW) remains well-positioned for sustained growth, with regular order inflows and normal project execution in the Middle East despite current escalating tensions. The company has bagged >INR10b contract to refurbish a 45MLD TTRO plant in Chennai within a period of 18 months, followed by O&M work over a period of 18.5 years. A robust order book of over INR163b (~5x FY25 revenue), preferred bidder in orders worth INR30b, and a strong bid pipeline of INR150-200b (~30% win rate) provide strong 15-20% revenue growth visibility over the next 3-4 years. We, thus, estimate a CAGR of 17%/22%/23% in revenue/EBITDA/PAT over FY25-28. The outlook for strong FCF generation, a net cash status (INR8.9b), and improving return ratios makes VATW’s scrip attractive at ~18x/15x FY27E/28E P/E.

Outlook

We reiterate a BUY rating and a TP of INR1,900, based on 26x FY27E P/E (~+1SD on an improved outlook).

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VA Tech Wabag - 1303026 - moti