Motilal Oswal Initiates 'Buy' Recommendation for VA Tech Wabag with a Target Price of Rs 1900

VA Tech Wabag Research Report

Company Overview VA Tech Wabag (VATW) remains well-positioned for sustained growth, driven by regular order inflows and normal project execution in the Middle East.

Key Developments The company has secured a significant INR10b contract to refurbish a 45 MLD TTRO plant in Chennai, with a completion period of 18 months, followed by O&M work over 18.5 years. This contract, along with a robust order book of over INR163b (approximately 5x FY25 revenue), preferred bidder status for INR30b worth of orders, and a strong bid pipeline of INR150-200b (with a 30% win rate), provides strong revenue growth visibility of 15-20% over the next 3-4 years.

Financial Projections We estimate a compound annual growth rate (CAGR) of 17% in revenue, 22% in EBITDA, and 23% in PAT over FY25-28. The company's outlook for strong free cash flow (FCF) generation, a net cash status of INR8.9b, and improving return ratios makes its scrip attractive.

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Valuation and Recommendation We reiterate a BUY rating and a target price of INR1,900, based on 26x FY27E P/E (approximately +1 standard deviation on an improved outlook).