MOSL: VA TECH WABAG (Buy)-Operating performance broadly in-line
​Va Tech Wabag: Operating performance broadly in-line
(VATW IN, Mkt Cap USD0.5b, CMP INR583, TP INR745, 28% Upside, Buy)
- Results in-line at operating level: Consol. sales grew 14% YoY to INR8.9b, below our estimate of INR9.7b. Revenue growth was supported by a pick-up in execution of key orders like Petronas, Polgawela and AMAS (Bahrain). Standalone sales rose 12% YoY to INR5.1b, while subsidiary sales grew 17% YoY to INR3.8b. Consol. EBITDA grew 41% YoY to INR0.8b, with the margin of 9.3% (+181bp YoY) above our estimate of 8.4%. Consol. recurring profit of INR388m was in line with our estimate of INR396m.
- Order backlog of INR71b provides robust revenue visibility: In 2QFY18, consol. order intake declined 30% YoY to INR5.0b, led by reduced order finalizations in the domestic market. Domestic ordering declined 80% YoY to INR1.1b. No major order was finalized in the domestic segment during the quarter. However, the medium-term order inflow outlook in the domestic market stands robust, given the strong pipeline of orders from Namami Gange, Amrut and municipal STPs, which are expected to be finalized in the medium term. Order backlog as of 2QFY18 stood muted YoY at INR71b.
- Maintains sales, order guidance: Management maintained its FY18 guidance of revenue of INR38b-40b (+25%) and order inflow of INR43b-45b (+25%).
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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