ICICI Securities has recommended a “Buy” rating for Va Tech Wabag with a target price of ₹1,445, according to their report dated August 14, 2024.
Va Tech Wabag’s revenue grew by 13% in the first quarter of FY25, with operating profit (EBITDA) increasing by 24% and a margin of 13%. The company’s management has confirmed its expectation of 15-20% revenue growth and a 13-15% EBITDA margin for FY25. Though new order inflow was low this quarter, the company is the preferred bidder for projects worth ₹6,000 crores, which should be finalized in the coming months.
The order book at the end of the quarter stood at ₹10,700 crores, including engineering, procurement, and construction (EPC) projects worth ₹5,200 crores and operations & maintenance (O&M) projects worth ₹4,200 crores. A strong influx of new orders is essential to maintain the company’s growth target.
Work on large projects, like the Chennai desalination project, is progressing well, and the company’s efforts in this area should help drive future growth.
Va Tech Wabag’s management has maintained its guidance for revenue growth and order inflow for FY25. ICICI Securities has raised its target price for the stock from ₹1,185 to ₹1,445, based on the company’s strong performance and promising outlook.
However, there are risks to consider, including the possibility of continued low order inflows and higher operating costs that could affect profit margins.
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