Shares of VA Tech Wabag jumped probably the most since June after Nomura hiked worth goal on the sewage and water therapy options supplier and on improved working margin.
Key highlights for September quarter (Consolidated, QoQ)
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Income up 4% to Rs 683.9 crore.
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Revenue earlier than distinctive gadgets and tax up 73.8% at Rs 35.1 crore.
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Revenue after tax up 78% at Rs 25.9 crore.
Ebitda margin stood at 8.3% in contrast with 7.1% a yr earlier.
The corporate additionally had an order guide of greater than Rs 10,040 crore, together with framework contracts for the primary half of the yr.
Rajneesh Chopra, international head of enterprise improvement for the corporate, mentioned after a good present within the second quarter, the second half of the yr might be significantly better. That might be on the again of a possible enchancment in abroad exports, elevated authorities curiosity resulting from United Nations’ sustainable improvement objectives and an increase in company environmental, social and governance consciousness.
“The objective for clear water and sanitation by 2030 by the UN may have an excellent influence. Traditionally, we’ve not seen such spends ever in our trade. We additionally foresee an enormous uptick in ESG by corporations, the place Wabag will have an effect due to its tech,” Chopra mentioned.
He additionally mentioned a continuing enchancment in margin is sustainable. “Quarter-on-quarter, there’s virtually a 2% enchancment in our Ebitda margin. There was immense stress on commodity costs, which we’ve got mitigated by tying up with distributors and fixing charges. We additionally renegotiated contracts with small distributors to enhance money flows.”
One other lever, Chopra mentioned, is the abroad industrial enterprise. “We all the time get higher margins there and even money movement is snug in comparison with India.”
Nomura View
The brokerage raised its worth goal on VA Tech Wabag to Rs 581, implying a 76% upside. It maintained its ‘purchase’ score on the inventory. That is as a result of:
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Order inflows strong for first half of FY22; execution on monitor to attain Rs 3,100-3,300 crore in gross sales for FY22.
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Begin of execution for worldwide initiatives in Russia and Malaysia from second half add visibility on an increase in execution, apart from the same old seasonal uptick.
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Order prospects are strong. Concentrate on industrial orders may enhance Ebitda margin. Industrial water capex is more and more targeted on self-sufficiency and to satisfy elevated regulatory scrutiny. This could assist 15% every year progress in prospects for higher-margin industrial water capex for subsequent five-seven years, in accordance with administration, which gives long-term order influx visibility.
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The corporate has pre-qualified for Chennai desalination tender. This mission is scheduled to be awarded by first quarter of FY23 and is multilaterally funded.
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Working capital improve in first half of FY22 is transient. Anticipate this working capital construct to partially reverse in second half pushed by elevated execution and money collections.
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Key dangers: Slowing home capex for water and a pointy rise in commodity prices.
Shares of VA Tech Wabag gained as a lot as 9.1% to Rs 361.5 apiece. Of the 4 analysts monitoring the corporate, two every advocate a ‘purchase’ and a ‘maintain’, in accordance with Bloomberg knowledge. The typical of 12-month consensus worth targets implies an upside of 62.4%.