Reduce VA Tech Wabag: target of Rs 185: ICICI Securities

ICICI Securities research report on VA Tech Wabag

VA Tech Wabag has taken 13.7% dilution, valuing the company at a market cap of Rs8.7bn, which we believe is at a substantial discount. The company was rather compelled to take this step given the cashflow stress and liquidity requirement to resume large orders like Namami Ganga etc. Strong orderbook of Rs111bn (4.4x TTM sales) lends visibility; however, 30% of orderbook is O&M which restricts near-to medium-term growth. Balance sheet stress continues to drag the overall liquidity and we believe this may lead to more fund raising.

Outlook

Hence, the company has come out with a proposal to further raise Rs2.8bn. Factoring in the commencement of Namami Ganga and gradual easing out of the lockdown, we raise earnings by 21.5% and 39% for FY21E and FY22E, respectively, and downgrade the stock to REDUCE from HOLD with a revised target price of Rs185 (previously: Rs121).

For all recommendations report, click here

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.

Read More