One of the Jhunjunwala stocks engaged in the design, construction, operation, and maintenance of water treatment and desalination plants for municipal and industrial clients. The stock has an upside potential of 52.72 percent from its high, and ICICI Direct has given a buy target price of Rs. 2,308.
Stock Price Movement
With a market capitalization of Rs. 9,398.84 crores, the shares of Va Tech Wabag Limited were closed at Rs. 1511.30 per equity share, down nearly around 1.95 percent from its previous day’s close price of Rs. 1541.40. The stock is trading below its 52-week high by 22.64 percent.
Company Overview
VA Tech Wabag Limited was founded in 1924 and is a 100-year-old multinational company based in Chennai, India. The company is a global leader in water and wastewater treatment solutions. The company specializes in designing, supplying, installing, and managing plants for drinking water, wastewater treatment, and industrial water treatment.
With a presence across four continents, the company has executed over 6,500 projects and holds more than 125 intellectual property rights, showcasing its dedication to innovation.
Target Price
ICICI Direct has maintained a buy rating on the VA Tech Wabag Limited and given a target price of Rs. 2,308, which has an upside potential of 52.72 percent from the closing price of Rs. 1511.30.
Rationale
VA Tech Wabag’s operational and financial performance is expected to improve significantly, with estimated revenue, EBITDA, and PAT growth at 7.4%, 21.9%, and 24.9% CAGR from FY24-27E. With a focus on return ratios and an asset-light model, the company is valued at Rs. 2,308, or 30x FY27E EPS.
Order Book
VA Tech Wabag has seen a strong order inflow of over Rs. 4,600 crores in H1 FY25, with 57% from international clients and 31% from the industrial sector. The company’s order book stands at over Rs. 14,500 crore, and it anticipates reaching Rs. 16,000 crore by the end of FY25, driven largely by international markets.
The company has already secured preferred bidder status in projects worth Rs. 3,500 crores, expected to convert soon. The company is on track to surpass its FY25 order intake guidance, aiming for Rs. 8,000 crores in total inflows, with a continued focus on E&P projects and international growth.
In the latest developments, the company announced that the Kingdom of Saudi Arabia canceled an order placed on 6th September, valued at approximately $317 million (~Rs. 2,700 crores). The order was for the EPCC of a 300 MLD Mega SWRO desalination plant in Yanbu.
Projects
VA Tech Wabag’s key projects include the 400 MLD Perur desalination plant in Chennai, progressing well with peak engineering and civil works, and the 200 MLD sewage treatment plant in Pagla, Bangladesh, which has resumed after a two-month disruption.
Additionally, the Kolkata HAM project has successfully achieved its Commercial Operation Date (COD), marking a significant milestone in the company’s project portfolio.
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Key orders received in H1FY25
In H1 FY25, the company entered the solar PV sector with a Rs. 1,000 crore contract for a 100 MLD desalination project from Indosol Solar, including 15 years of O&M. Other notable orders include repeat business from the Nemmeli Chennai plant and a Rs. 300 crore contract from Reliance Industries.
Shareholding Pattern
In September 2024, Va Tech Wabag Limited had a majority stake held by the promoters at 19.12 percent, foreign institutional investors at 14.68 percent, domestic institutional investors at 3.59 percent, and the public at 62.59 percent. In the public holding, Rekha Rakesh Jhunjunwala holds an 8.04% stake in Va Tech Wabag Limited.
Recent quarter results and ratios
Va Tech Wabag Limited’s revenue has increased from Rs. 665 crore in Q2 FY24 to Rs. 700 crore in Q2 FY25, which has grown by 5.26 percent. The net profit of Va Tech Wabag Limited has also grown by 16.67 percent, from Rs. 60 crore in Q2 FY24 to Rs. 70 crore in Q2 FY25.
Va Tech Wabag Limited’s revenue and net profit have grown at a CAGR of 2.80 percent and 31.35 percent, respectively, over the last four years.
In terms of return ratios, the company’s ROCE and ROE should be 19.8 percent and 13.8 percent, respectively. The debt-to-equity ratio of the company is to be 0.22x, which shows the company is almost debt-free. Va Tech Wabag Limited’s EPS is to be Rs. 42.
Written By – Nikhil Naik
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