Buy Va Tech Wabag; target of Rs 828: SPA Research

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26 Aug, 2025 12:21

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SPA Research report on Va Tech Wabag
Va Tech Wabag reported below than expected profitability numbers owing to tepid execution overseas and incremental project related provisioning expenses worth INR 100 mn. Consolidated revenues increased by 14.5% YoY entirely driven by 101.5% surge in domestic revenues as overseas revenue declined by 27.0% YoY. Margins deteriorated by 187 bps YoY due to 525 bps surge in employee cost owing to cost over run at Istanbul O&M project. Order inflows remained strong as Wabag booked orders worth INR 11.1 bn in Q1FY16. Long term story in Wabag continues to remain intact with rising focus on clean water for drinking as well as better effluent treatment. We retain our BUY rating on the stock with a target of INR 828.

Outlook & Valuation"WABAG with presence across the value chain of water spectrum is the best play on water scarcity theme. Superior return ratios (RoCE of +20%), cash rich balance sheet, asset light business model and technological & locational advantage places it above its peers. Long term opportunity remains immense in Wabag as upcoming opportunities of over INR 700 bn (Ganga cleaning + Delhi Jal board project), alone would more than double its order backlog, even if Wabag maintains a strike rate of mere 10%.We continue to retain our BUY rating on the stock with a target of INR 828 based on 24x FY17E earnings (PEG 0.8x)", says SPA Research report.

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