Buy Va Tech Wabag; target of Rs 702: Systematix

Systematix Shares' research report on Va Tech Wabag

"Va Tech Wabag registered strong revenues growth of 66% yoy to Rs 589 cr for Q3FY14. Strong growth in revenues was primarily led by overseas markets which grew by 102% yoy to record revenues of Rs 359 cr. Domestic markets witnessed a growth of 36% yoy to Rs 239 cr. Consolidated EBITDA increased by 95% to Rs 44 cr while EBITDA margins improved by 109 bps yoy to 7.5% on account of improved employee utilization and slower growth in other expenses. Reported PAT more than doubled in Q3FY14 to Rs 21.7 cr led by EBITDA gains and lower provisioning for tax."

"Order inflows remained strong with the company recording third successive quarter of inflows in excess of Rs 1000 cr. The company received orders of Rs 3048 cr in 9MFY14 and the order backlog has swelled to Rs 6000 cr giving visibility of over 3 years. Additionally the company has Rs 1169 cr of framework contracts of which Rs 244 cr of orders have been booked in Jan-2014."

"The company is looking to invest in newer geographies in LatAm and Spain and to strengthen its presence in the current geographies. It has been able to reduce its cost of operations in high cost geographies and bring it under control. Operational decentralization and cost rationalization by leveraging on low cost Indian advantage in global markets would further lead to margin improvement."

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