Shares of this water management stock jumped around 4 percent to Rs.1,424.6 per share after Axis securities set a target price indicating potential upside growth.
Price Movement
In Thursday’s trading session, Va Tech Wabag’s share price surged 3.9 percent, reaching an intraday high of Rs.1,424.6 per share from its previous close of Rs.1,370.65 apiece. The price has since retreated to Rs.1,368.8 per share. Over the past year, the stock has delivered impressive returns of over 200 percent.
What happened
Axis Securities, a reputed brokerage firm has set a target price of Rs.1,700 apiece for Va Tech Wabag Limited (VTW), indicating a potential upside of 24 percent from the current share price of Rs.1,368.8 per share.
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The firm has issued a “Buy” rating based on this target price, suggesting strong growth prospects for the stock. The brokerage supports the recommendation based on favorable industry conditions, rising profitability, a strong order book, and the expansion of the company’s offerings.
Rationale for the rating
The brokerage noted that VTW is well-positioned to benefit from the growing water security market, as regulators boost funding and tighten industrial waste rules.
Increased spending on water infrastructure presents major opportunities, and VTW’s enhanced business mix has improved profitability, raising EBITDA margins to over 13 percent in FY24, from 8 to 9 percent previously.
VTW is expanding beyond water solutions by partnering with Peak Sustainability Ventures to build 100 Bio-CNG plants across multiple regions, shifting from biogas electricity to CNG production.
The company is also exploring collaborations in the semiconductor and green hydrogen sectors. Axis expects these clean energy initiatives to gain traction in 3-4 years.
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Order Book
As of June 2024, VTW’s order book is around Rs.10,676 crore, including a notable Rs.2,700 crore desalination plant contract in Saudi Arabia. The company aims for an order book of Rs.16,000 crore by FY25, driven by growth in the Middle East, which provides larger projects and higher margins.
This current order book offers revenue visibility for the next 3-4 years, ensuring stable inflows in the medium term, according to the report.
Financial Performance
In its latest financial update, VTW reported net sales of Rs.626 crore for Q1 FY25, marking a 13.2 percent rise from Rs.553 crore in Q1 FY24. The company also saw a 10 percent increase in net profit, reaching Rs.55 crore, compared to Rs.50 crore in the same period last year.
Shareholding Pattern
As per the June 2024 shareholding pattern, the promoters of Va Tech Wabag Limited hold a 19.12 percent stake, while Foreign Institutional Investors hold an 11.52 percent stake.
Domestic Institutional Investors and Retail investors hold a stake of 4.99 percent and 64.35 percent, respectively in the company. Rekha Rakesh Jhunjunwala owns a 8.04 percent stake in VTW.
Company Overview
Va Tech Wabag Ltd is an Indian company specializing in water treatment, providing solutions for drinking water, industrial wastewater, desalination, and sludge treatment. The company has completed over 6,500 municipal and industrial projects in more than 25 countries, serving over 88 million people.
Written by – Siddesh S Raskar
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