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Geojit Financial
VA Tech Wabag (Buy)
Target: ₹288
CMP: ₹257.30
VA Tech Wabag Ltd is a Chennai based Multinational, providing solutions on water recycling and reuse for municipal and corporate clients. Current order backlog stands at ₹10,712 crore with order intake of ₹971 crore during the quarter.
Company registered better than expected revenue of ₹796 crore registering a growth of 17.2 per cent y-o-y and 30.8 per cent q-o-q. We expect revenue to grow at a CAGR of 11.7 per cent over FY20-23. Increased government focus on water recycling and higher budgetary spend will boost the order intake going forward.
Debt level has shown significant reduction and stands at ₹383 crore against ₹482 crore in FY20 and ₹392 crore in Q2-FY21. We expect further decline in debt level due to improved revenue generation.
Considering the positive outlook of the water treatment industry and expected revenue rebound along with improving cash position, we value the stock at 1 year forward PE of 10.5x its FY23E earnings with a target price of ₹288, and upgrade our rating to Buy.
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