Buy VA Tech Wabag; target of Rs 740: Axis Direct

Axis Direct's research report on VA Tech Wabag

Q1FY18 order inflow at ~Rs 7 bn was down ~13% YoY (vs. Rs 8 bn YoY). Order backlog at Rs 74 bn was down 1% YoY (India up 23%, International subsidiaries down 35%). Wabag booked one large repeat order from Bangalore Water Supply and Sewerage Board (BWSSB) for 150 MLD Sewage Treatment Plant (STP) worth Rs 3.86 bn.

Outlook

Strong order pipeline: Management talked about strong order pipeline for the company both in the domestic as well as international market, driven by expansion and greenfield projects in oil & gas industry. Domestic order pipeline highlighted earlier: (a) desalination plants in Chennai (Rs 17-22 bn), (b) 7 sewage treatment plants in Mumbai worth ~Rs 50 bn, and (c) Namami Gange projects opportunity worth Rs 200-250 bn over next 2-3 years.