Earnings Update - Va Tech Wabag (VATW IN) - Healthy growth; Strong execution of projects - CSEC Research

Healthy growth; Strong execution of projects

- Consolidated revenues grew by 33.3% YoY to INR 11.3bn in 4QFY17 aided by timely execution in both domestic centric business (+57% YoY) to 4.5bn and overseas (+19% YoY) projects.

- Revenue mix in 4QFY17: Overseas business at 62% and domestic business at 38%.

- The company currently has an order book of INR 81.9bn, which includes framework orders. Order intake for FY17 stood at INR 36.2bn.

- Management guidance for FY18E: Revenue of INR 38bn to INR 40bn and Order Intake of INR 43bn to INR 45bn on account of the company's expansion into newer geographies of Latin America.

Valuation: Healthy order intake and strong order book growth increases revenue visibility for ~2 years projecting a positive outlook for the company. A key point to monitor would be the speedy execution of low margin projects which are also putting a strain on the working capital of the company. At CMP the stock trades at 15.7x to FY19E. We rate the stock a BUY rating and a target price of INR 752 assigning a target multiple of 18x FY19E.

Risks: Cancellation of orders, slower order execution, delayed/non receipt of payments.

Shares of VA TECH WABAG LTD. was last trading in BSE at Rs.670.7 as compared to the previous close of Rs. 664.55. The total number of shares traded during the day was 7209 in over 679 trades.

The stock hit an intraday high of Rs. 674.95 and intraday low of 665. The net turnover during the day was Rs. 4827835.

Source : Equity Bulls

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