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Shares of Ion Exchange (India) hit an all-time high of ₹2,982.60 on the BSE on Tuesday, after the company announced that it secured a contract worth ₹343.36 crore from Indian Oil Corporation (IOCL) for setting up a zero liquid discharge plant at the Panipat refinery.
The project is to be commissioned within 16 months from the date of Letter of Acceptance, the company said in a notice to the stock exchanges.
The stock on Tuesday closed 2.27 per cent higher over the previous day’s close of ₹2,904.50.
Analysts bullish
Analysts are bullish on the stock, thanks to its healthy order-book. Robust governmental initiatives, such as the Atal Mission for Rejuvenation and Urban Transformation, National Mission for Clean Ganga, Jal Jeevan Mission, and community drinking water schemes contribute to the growth of the Indian water and wastewater treatment market. Ion Exchange is likely to benefit from these initiative, analysts said.
Besides, the upcoming Budget will also enhance allocation to the sector, they opined.
Ion Exchange specialises in water and environment management with over five decades of experience. There is huge potential in water and wastewater treatment as the demand for water is going to outstrip the supply causing water scarcity in many areas of India, said HDF securiteis.
The company’s operating performance will benefit over the medium term from its healthy unexecuted orders and timely execution of its order from the Sri Lankan Water Board and the order received from UP SWSM. Outstanding order book of ₹2,674 crore, including the Sri Lanka and UP projects, provides a strong visibility.
Firing on all cylinders
A case study report by Kredent Infoedge P Ltd said In H1 FY23, the sales grew 20 per cent y-o-y to ₹830 crore. The sales growth was supported by all the business segments.
The company has a total order-book of ₹2,795 crore, which provides strong revenue visibility from the engineering segment. It witnessed steady order inflow both in domestic and international markets.
In H1 FY23, the order inflow stood at ₹528 crore. The execution of the UP Jal Nigam Project has been progressing well. Regarding the Sri Lanka order, the execution remained affected due to the ongoing uncertainties in the island-nation.
ROCE/ROE
The company’s return on capital employed (ROCE) has been constantly improving since FY15 because of higher growth in EBIT. The return on equity (ROE) has been constantly improving from FY15 because of sustained high growth in profit.
In FY22, the ROE contracted because of the high increase in net worth. In FY21, free cash flow per share increased because of higher cash from operation and lower capex. Capex spent for FY21 was at ₹30 crore (v/s ₹32 crore in FY20).
In FY22, the free cash flow per share was lower because of increase in capex. The company incurred capex of ₹50 crore mainly towards the expansion of membrane plant, improving capacity of the engineering segment and an incremental spend on the chemicals segment, the report added.
According to Kredent Infoedge, Ion Exchange has been in a strong up-move since December 2020 and has moved up from about ₹800. “Going forward, ₹2,000-2,200 would act as a strong base for the stock and can be used by long-term investors for accumulation,” it added.
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