Buy Va Tech Wabag; target of Rs 830: ICICIdirect

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26 Aug, 2025 12:21

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ICICIdirect.com's  report on Va Tech WabagWabag’s Q2FY16 revenues increased 18.8% YoY to Rs 601.4 crore driven by 34.5% YoY increase across domestic revenues and 10.5% YoY increase across its international business. Order intake during the quarter amounted to Rs 1974 crore vs. Rs 724.8 crore booked in Q2FY15. Wabag currently has an order backlog of Rs 8,618 crore including a framework contract of Rs 1,542 crore. EBITDA increased 34.5% YoY to Rs 46.5 crore driven by strong topline growth, which was further augmented by less than proportionate increase across operating expenses during the quarter. Accordingly, the EBITDA margin increased 90 bps YoY to 7.7%. Consequently, Wabag reported a PAT of Rs 15.4 crore vs. PAT of Rs 14.2 crore YoYOutlook and valuationGoing ahead, we expect Wabag’s growth to come from a revival inindustrial capex across Indian and global markets. Revenues are expectedto grow at a CAGR of 16.6% over FY15-17E while PAT is expected to grow at a CAGR of 21.1% over the same period coupled with a margin improvement of 60 bps over FY15-17E. The margin improvement is expected to be driven by the turnaround of its European subsidiary and a shift of its high cost international business operations to the low cost Indian territory. This, we believe, will lead to a healthy return ratio profile, going ahead, as RoE is expected to improve to 18.4% in FY17 from 15.0% in FY15. Hence, we believe Wabag will witness quality earning growth, which would lead to a re-rating of investment multiples. Furthermore, the management has maintained its earlier guidance of 20% growth in order intake and revenue. Hence, though the margin in Q1FY16 was impacted due to higher execution of low margin businesses, we have maintained our earning estimates on the back of strong order booking during the quarter. Such a strong order intake not only enhances the company’s order book position but also strengthen our positive outlook on the company. Hence, we maintain our target price of Rs 830 and maintain BUYon Wabag by assigning a target P/E of 22x on FY17E EPS.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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