MOSL: VA TECH WABAG (Neutral)-Performance below expectations on all fronts
Va Tech Wabag: Performance below expectations on all fronts
(VATW IN, Mkt Cap USD0.2b, CMP INR274, TP INR300, 10% Upside, Neutral)
- Operational performance below estimate: Consol. sales declined 24% YoY to INR6.6b (below our expectation of INR9.5b). Standalone sales declined 2% YoY to INR4.5b, while subsidiary sales declined 48% YoY to INR2.1b. The revenue decline was on account of multiple projects reaching near-completion stage, while new projects are yet to pick up meaningfully. Consol. EBITDA declined 29% YoY to INR539m, with margin of 8.1% (-70bp YoY) below our estimate of 9.1%. Margins declined on account of operating de-leverage. Recurring profit of INR201m (-28% YoY) was below our estimate of INR409m. Forex loss of INR46m was booked during the quarter.
- Order backlog at INR83.6b, up 28%YoY: Order backlog as on date stands at INR83.6b with order inflow of INR5.8b. VATW has also signed framework contracts worth INR7b, which will get converted into firm orders after receiving advance from customers. Key orders won during the quarter were (a) De-sal plant Karnataka-MRPL (INR4.7b), and (b) O&M orders Chennai-CMWSSB (INR559m). Domestic tendering/orders are picking up for projects like Namami Ganga and Mumbai STP plant.
- Revenue guidance for FY19 scaled down: Management has scaled down its FY19 revenue guidance from INR40-42b (+21% YoY at the upper-end of the guidance) to INR35-37b (+7% YoY at the upper-end of the guidance), while it has maintained its order inflow guidance of INR53-57b (+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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