VA Tech Wabag - 3QF Y13 results expectation - Ambit

(VATW IN, mcap US$261mn, BUY, TP Rs750, 42% upside)

Analyst: Nitin Bhasin, nitinbhasin@ambitcapital.com, Tel: +91 22 3043 3241

VA Tech will report its 3QFY13 results today. We expect consolidated revenue to increase by 19% YoY on account of strong revenue growth in the international business and moderate revenue growth in the Indian business. We expect revenue growth of 7% YoY in the standalone business (on a higher revenue base in 3QFY12), and we expect 38% YoY revenue growth in the international business (on a lower revenue base in 3QFY12). Strong revenue growth in the international business can lead to under-absorption of fixed overheads, and therefore, we model consolidated EBITDA margin of 9.5% in 3QFY13 (vs 7.1% in 3QFY12). We further expect that the improvement in revenue growth and EBITDA margin will lead to net profit of Rs183mn in 3QFY13 (vs Rs107mn in 3QFY12).

Key factors to watch out for in the results and the conference call will be: (a) revenue growth and EBITDA margin improvement on the back of large EPC orders won in the past 12 months, and (b) management commentary on the expected order inflows in the next 10-12 months. Whilst our 3QFY13 revenue estimate is marginally below consensus estimate, our PAT estimate is 3% ahead of consensus, because we model in higher EBITDA margin as compared to consensus. The stock is currently trading at a P/E of 14.7x and 11.5x on our FY13 and FY14 earnings estimates of Rs36/share and Rs45/share, respectively.

Source : Equity Bulls

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