Shares of smallcap firm
, a homegrown water treatment company incorporated in 1995, have been on a roll in the last one year, gaining 150 per cent.
The company counts ace investor Rakesh Jhunjhunwala and his wife Rekha Jhunjhunwala among the shareholders. The duo held 50,00,000 shares, or 8 per cent stake, in the company as per the latest shareholding data. That stake is worth Rs 154 crore at the current market price of Rs 315. They have kept the stake constant in the last two quarters.
The Jhunjhunwalas seem to swear by the prospects of the business. In an interview with a Hindi new channel recently, he curtly pointed out that the government was keen on providing clean and safe drinking water to all as most of the diseases are waterborne.
Financial performance
Va Tech Wabag reported a consolidated profit after tax of Rs 110 crore for March quarter, up 21 per cent year-on-year (YoY). Consolidated total income rose 23.44 per cent to Rs 1,000.81 crore from Rs 810.75 crore reported for the same quarter last year.
In standalone terms, revenues stood at Rs 1,843 crore, Ebitda at Rs 170 crore and PAT at Rs 73 crore, which marked an increase of 24 per cent YoY. The stock has rallied 27 per cent in last one month and 15 per cent in a week.
Management Outlook
The company has turned net cash in Q4. The management said its collections have improved and receivables have come down.
They see faster execution going forward. The Chennai-based company boasts of an order book of over Rs 9,500 crore, including some framework contracts. The company expects to see decent growth this year
Analyst calls on the stock
Brokerage
has a hold rating on Va Tech Wabag with a price target of Rs 307 as it finds the stock valuation rich. It also expects working capital stress to cap the gains.
“Financial closure of the Namami Ganga project and a pickup in domestic execution provide growth visibility. The stress on working capital continues, and provisions towards doubtful debts are likely to limit upsides on margin. Order prospects are promising, which are likely to support FY23E earnings,” the brokerage said.
Philip Capital has a ‘buy’ rating on the stock with a price target of Rs 380. “We believe the scope for robust order inflows in FY22 and the management’s focus on cash flows permit a re-rating,” it said.
