Va Tech Wabag: A Promising Investment Opportunity
Are you looking for a potential investment opportunity that offers both stability and growth prospects? Look no further than Va Tech Wabag (CMP: Rs 460 M Cap: Rs 2,862 Nifty: 20,103.1). In this blog, we'll break down why this company could be a smart tactical pick for the week.
Va Tech Wabag's stock has recently caught our attention. It reached a high of around Rs 540 per share before settling at its current level of Rs 460 per share. While the pace of execution might be a bit slow, there are several factors that make this company stand out.
Focus on Profitability
One of the key factors that make Va Tech Wabag an attractive option is its focus on profitability. The company has been diligently reducing its debt and working capital. This, coupled with an asset-light model and emphasis on technology-driven projects, has resulted in improving margins.
At its current market price, Va Tech Wabag is trading at just 9 times its estimated earnings for fiscal year 2025. This suggests that the stock may be undervalued, presenting an opportunity for potential investors.
Looking ahead, we anticipate a notable improvement in the company's execution over the next few quarters. Management has hinted at the execution of EPC projects in Bangladesh, which could significantly contribute to the company's revenue.
Strong Order Book
Va Tech Wabag's order book is impressive. The EPC order book stands at Rs 6500 crore, which is 2.6 times its annual segment revenue.
The total order book, including O&M orders, is around Rs 12500 crore, approximately 4 times its annual consolidated revenue.
This demonstrates a healthy demand for the company's services. Notably, during the last quarter, the company secured orders worth Rs 730 crore and is actively seeking more orders from the Middle East and Africa through strategic partnerships.
The company's strategic focus on engineering and technology-driven projects is expected to result in higher profit margins.
Va Tech Wabag has set a target of achieving an EBITDA margin of around 10 percent in fiscal year 2024, a significant improvement from the 8.8 percent EBITDA margin achieved in fiscal year 2023.
With the anticipation of better margins and improved execution due to strong order inflows, Va Tech Wabag's earnings outlook appears promising.
In summary, Va Tech Wabag appears to be an attractive investment option. Its focus on execution, a robust project pipeline, improving profit margins, and a strengthening balance sheet all contribute to its promising future.
While it's essential to perform your own due diligence before investing, Va Tech Wabag's strategic position in the market suggests that it deserves a closer look from potential investors.