MOSL: VA TECH WABAG (Buy)-Operating performance above expectations
​Va Tech Wabag: Operating performance above expectations
(vatw IN, Mkt Cap USD0.5b, CMP INR611, TP INR800, 31% Upside, Buy)
- Result above estimates at operating level: Consol. sales grew 15% YoY to INR6.7b, in line with our estimate of INR6.6b, led by pick-up in execution of key orders like Petronas, Polgawela and AMAS (Bahrain). Standalone sales rose 36% YoY to INR3.5b, while subsidiary sales were muted at INR3.1b. Consol. EBITDA grew 52% YoY to INR0.4b, with the margin of 6.3% (+152bp YoY) above our estimate of 5.0%. Consol. profit of INR84m was 25% below our estimate of INR111m due to a higher tax rate (62% v/s est. of 38%).
- Order backlog of INR74b provides robust revenue visibility: In 1QFY18, consol. order intake declined 13% YoY to INR7.0b, led by reduced order finalizations in the overseas territory. Overseas ordering declined 64% YoY to INR1.2b. Even in domestic market, barring one large order finalization of Bangalore STP (INR3.9b), ordering stood muted. Order backlog as of 1QFY18 fell 1% YoY to INR73.9b. Order inflow outlook in the domestic market stands robust, given the strong pipeline of orders from Namami Gange, Amrut and municipal STP orders, which are expected to be finalized in medium term.
- Maintains guidance on sales, orders: Management maintained guidance for revenue of INR38b-40b (+25%) and order inflow of INR44b-45b (+25%) for FY18.
VA Tech Wabag Limited is a holding company engaged in water treatment field. The Company's principal activities include design, supply, installation, construction and operational management of drinking water, waste water treatment, industrial water treatment and desalination plants. The Company's segments include India and Rest of World. Its product portfolio includes water reclamation, municipal used water treatment, industrial effluent treatment, anaerobic sludge treatment, and industrial water reuse and recycling. The Company has four clusters: India, Europe, Middle East & Africa (MEA), and Latin America (LATAM). The India cluster provides end-to-end water solutions for drinking water and wastewater plants, both in the municipal and industrial sectors. The European cluster caters to small and mid-sized projects. The MEA cluster has two major regions: the Middle East and Africa. The LATAM cluster has countries, including Brazil, Chile, Colombia, Ecuador, Mexico and Peru.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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