MOSL: VA TECH WABAG (Buy)-Exceeds expectations led by strong show by subs; guidance maintained
Va Tech Wabag: Exceeds expectations led by strong show by subs; guidance maintained
(VATW IN, Mkt Cap USD0.3b, CMP INR378, TP INR450, 18% Upside, Buy)
- Beat estimates on strong show by overseas subsidiaries: sales grew 3% YoY to INR6.9b (in-line). Standalone sales declined 4% YoY to INR3.4b, while subsidiary sales grew 11% YoY to INR3.5b. Consol. EBITDA rose 59% YoY to INR646m, with the margin of 9.4% (+330bp YoY) above our estimate of 7% due to a sharp jump in profitability of subsidiaries (where margin was 9.7% in 1QFY19 v/s 1.2% in the year-ago period). Margin improvement was driven by (a) better project mix and (b) higher margins in projects nearing completion (Dangote, Nigeria and Al Saad, Saudi Arabia). Recurring profit of INR364m was above our estimate of INR158m. A forex loss of INR234m was booked during the quarter, primarily relating to translation losses on MTM on loan outstanding in Turkey and Czech Republic.
- Order backlog down 10% YoY: Order intake was down 25% YoY to INR5.3b, while order backlog fell 10% YoY to INR66b in 1QFY19. VATW has also signed framework contracts worth INR7b, which will be converted into firm orders post receiving advances from customers. Key orders won during the quarter were (a) NMDC – ZLD project (INR1.7b), (b) Purolite (INR1.6b) and (c) Al Saad, Saudi Arabia (INR758m). Domestic tendering/orders are picking up for projects like Namami Ganga, Mumbai STP and the Chennai desalination plant.
- Guidance for FY19 maintained: Management maintained its FY19 guidance of revenue of INR40b-42b (+21% YoY, at the upper end of the guidance) and order inflow of INR53b-57b (+79% YoY, at the upper end of the guidance).
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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