Buy Va Tech Wabag; target of Rs 1445: KRChoksey

KRChoksey's report on Va Tech Wabag

"Wabag reported revenue of Rs 398 crore (32.5%, YoY) above our expectation of Rs 321 crore which is contributed by domestic sales & overseas sales Rs 130 crore and Rs 272 crore respectively. Wabag reported EBITDA of Rs 20.5 crore (+62.6%, YoY, domestic Rs 11.5 crore & overseas Rs 9 crore) and margins improved by 60 bps due to high contribution from overseas market. However, overseas margins have shown continuous improvement to 3.3%. Wabag reported reduction in working capital days from 66 days to 49 days in FY14. Management has guided Rs 26-27bn revenue & 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."

"At CMP Rs 1,338 the stock trades at 13.6x & 11.0x for FY15E & FY16E respectively. We used EV/ EBITDA methodology to value Wabag, assign 13.0x (Rs 216 crore, FY16E) to domestic business at par with domestic peers and 8.0x (Rs 90 crore, FY16E) to overseas business and derived a TP of Rs 1,445 with an upside potential of 8%. Buy the stock," says KRChoksey research report.

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