Va Tech Wabag Ltd. share price target

Background: VA Tech Wabag is a leading MNC in the water treatment space. The company has vast experience in plant building, planning, execution and operation of drinking water plants and waste water plants for both municipal and industrial sectors. The company has a multinational pedigree and offers customer specific solutions. The company has about 100+ patents which include both products and process patents and Wabag Austria has 51 patents that are awaiting...

The order backlog of the company remains at | 10,826 crore excluding framework contracts against TTM revenues of | 2451 crore, representing TTM book-bill of 4.4x. The management believes the company would achieve its annual revenue guidance of | 3000 crore (9M revenues of | 1772 crore) but we expect the company to be able to execute contracts worth | 800-900 crore in the last quarter given that old receivables are already stuck at present and any large growth could distort balance sheet, going ahead. Further, delay in proceeds from old receivables such as TSGENCO, Tecpro...

Sector: Engineering & Capital goods /Mid Cap | Earnings Update 2QFY20 Background: VA Tech Wabag is a leading MNC in the water treatment space. The company has vast experience in plant building, planning, execution and operation of drinking and waste water plants for both municipal and industrial sectors. The company has a multinational pedigree and offers customer specific solutions. The company has about 100+ patents which include both products and process patents and Wabag Austria has 51 patents that are awaiting approval. As part of organizational...

sales declined 15% YoY to INR6.4b (v/s est. The sales disappointment was due to key overseas projects, such as AMAS and RAPID, getting completed, whereas Europe recorded subdued performance. EBITDA was up 23% YoY to INR615m, 13% below our est. EBITDA margin stood at 9.7% (+310bp YoY) and above our estimate of 8.5%. Margin expansion came in due to projects being in the engineering and procurement phase. PBT stood at INR363m, up 28% YoY but 14% below our est. Adj. PAT stood at INR271m, up 19% YoY and 8% below our est.

Healthy inflows in FY19, FY20E guidance at ~| 5200 crore Wabag witnessed order inflows of | 4878 crore in FY19. Key orders won include SWTP in Saudi Arabia (| 933 crore), desalination order in Tunisia (| 596 crore), STP order in Doha (| 555 crore) and Namami Gange orders worth | 1035 crore. The management has guided for order inflows of | 5000-5400 crore in FY20E. This is on the back of orders expected from large projects like the desalination and sewage treatment plants in Chennai, Mumbai (| 11000 crore) and Delhi (| 1500 crore). Wabag has already been declared...

Order backlog providing robust revenue visibility: Order backlog as on date stands at INR85.9b (+26% YoY in 4QFY19), with order inflow of INR13.1b (-21% YoY). VATW has also signed framework contracts worth INR7b, which will get converted into firm orders after receiving advance from customers. The current order backlog provides strong revenue visibility of INR3.1x its FY19 revenue. VATW won two orders under the Namami Gange scheme worth INR10b, which will entail equity investment of INR150m. Issues revenue and order inflow guidance for FY20: Management has issued...

ICICI Securities Ltd | Retail Equity Research VA Tech Wabag (Wabag) reported dismal Q3FY19 numbers Wabag's revenues fell 23.5% YoY to | 661.9 crore. Lower topline was due to muted execution in both domestic (down 2.3% YoY) & overseas segment (down 23.4%YoY). Overseas segment contributed ~66% whereas domestic segment contributed ~33% to the topline Absolute EBITDA declined 36.5% YoY to | 49.3 crore. EBIDTA margins came in at 7.4% vs. 9% YoY. Lower margins were mostly on...

sales declined 24% YoY to INR6.6b (below our expectation of INR9.5b). Standalone sales declined 2% YoY to INR4.5b, while subsidiary sales declined 48% YoY to INR2.1b. The revenue decline was on account of multiple projects reaching near-completion stage, while new projects are yet to pick up meaningfully. EBITDA declined 29% YoY to INR539m, with margin of 8.1% (-70bp YoY) below our estimate of 9.1%. Margins declined on account of operating de-leverage. Recurring profit of INR201m (-28% YoY) was below our estimate of INR409m. Forex loss of INR46m was booked during the quarter.