VA Tech Wabag - Healthy execution, working capital concerns remain - ICICI Securities
Posted On:
2021-02-15 04:36:07
(Time Zone: Arizona, USA)
VA Tech Wabag's Q3FY21 performance was better than expectations, supported by pick up in both domestic and overseas execution leading to healthy operating margins. Kolkata HAM project financial closure is in its final stages and is likely to commence by Mar'21. Chennai 400MLD desalination project ordering activity has commenced and pre-qualification bids are expected to get over by next month. Strong orderbook of Rs107bn (4.2x TTM sales) lends visibility and the company has announced EUR100mn worth of overseas orders; however, 33% of orderbook is O&M which restricts near- to medium-term growth. Gross debt has reduced to Rs3.83bn in Dec'20 from Rs4.32bn in Sep'20 and Rs5.2bn in Mar'20. Factoring better-than-expected earnings, increased capex outlay by government in water space and commencement of Namami Ganga, we raise earnings by 68.5% and 15.6% for FY21E and FY22E, respectively, and maintain HOLD with a revised target price of Rs225 (previously: Rs190).