Buy VA Tech Wabag; target of Rs 611: ICICI Securities

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ICICI Securities research report on VA Tech Wabag

VA Tech Wabag’s (Wabag) orderbook increased to INR 125bn as of Jun-23 on account of strong order inflow in the last 5 quarters. Of the total, EPC orders account for INR 65bn (2.6x book to bill ratio). Note that the O&M orderbook at INR 48bn provides strong revenue visibility. Wabag is increasingly focusing on engineering and procurement (E&P) projects over EPC orders to improve profitability (a third of the EPC orderbook is for E&P). As a result, the company’s margins have now moved to double digits. Also, over the years, it has developed a significant moat around water recycling, reuse, zero liquid discharge, desalination, etc. Wabag is reinventing itself to drive growth and profitability.

Outlook

We maintain our BUY rating on the stock, valuing it at 12x FY25E EPS of INR 51/share with an unchanged target price of INR 611/share

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VA Tech Wabag - 17 -08 - 2023 - isc