Va Tech Wabag Ltd. share price target

We maintain our BUY rating on the stock.

VA Tech Wabag Limited reported a decent performance during Q3FY2025 with sales growth of 15.1% y-o-y to Rs. 811 crore. Domestic revenue increased 24% y-o-y to Rs. 496 crore while the international revenue was up 2% y-o-y to Rs. 308 crore.

We recommend a BUY on the stock with a near-term TP of Rs 1,860/Share, implying an upside of 10% from the CMP

We maintain our BUY rating on this stock.

Va Tech Wabag’s adjusted net profit increased 27.8% y-o-y to Rs. 70 crore. Revenue of Rs. 700 crore grew 5.3% y-o-y and OPM stood at 13.4%, up 42 bps y-o-y.

We visited Va Tech Wabag’s waste water treatment and desalination plants in Chennai and also
had an interaction with the management. Company has maintained its guidance of 15% revenue
growth and margins of 13-15% for the next 3-5 years.

VA Tech Wabag (Wabag) bagged a mammoth order of INR 27bn (equivalent to its FY24 revenue) from the Middle East for a desalination plant – the entire order is for EPC.

? Va Tech Wabag’s adjusted profit decreased 10% y-o-y to Rs. 72 crore due to higher interest expenses. Revenue of Rs. 934 crore was up 0.8% y-o-y and OPM stood at 12.4%, up 40bps y-o-y.

Surfing the strong water wave

VA Tech Wabag’s (Wabag) orderbook increased to INR 125bn as of Jun-23 on account of strong order inflow in the last 5 quarters. Of the total, EPC orders account for INR 65bn (2.6x book to bill ratio). Note that the O&M orderbook at INR 48bn provides strong revenue visibility.

Desalination is gaining foothold in India and VA Tech Wabag (Wabag) has the largest market share in building and operating desalination plants in the country. It was the EPC contractor for the country’s largest desalination plant, in Nemmeli, Chennai, for which it is also doing operations and maintenance.