Buy Va Tech Wabag; target of Rs 760: Motilal Oswal
Motilal Oswal’s research report on Va Tech Wabag
VATW is unlikely to participate in small ETPs, but should participate in projects of INR 1b-3b in industrial clusters. If local civic bodies decide to set up common ETPs, it would lead to more complex and larger size projects, where competition is lower. VATW would benefit from such a trend.
Strong revenue growth is likely to be supported by a 20% rise in the order book, while margin expansion is likely to reflect higher share of domestic orders and completion of low margin orders from AP Genco and Turkey sewerage treatment plant. We value the stock at 19x FY19E EPS of INR 40 (in line with its five-year average at 19.1x) to arrive at a target price of INR 760.
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