Buy This Small Cap Industrial Stock For Strong Upside In 6 Months: HDFC Securities

Q2FY22 results of Antony Waste Handling Cell limited (AWHCL)

The brokerage has said in a report that "The total operating revenue for Q2FY22 was Rs. 158.4Cr (32%/6% YoY /QoQ) out of which Rs.105.1 Cr was from MSW C&T and Rs.37.6 Cr was from MSW Processing segment. The revenue improved due to increased tonnage because of the easing of lockdown. EBITDA Margin came at 26.8% for the quarter compared to 27.9% in Q1FY22 and 27.4% in Q2FY21. Consolidated PAT has increased by 6% QoQ to Rs. 23.6 Cr as compared to Rs. 22.3 Cr in Q1FY22. During the quarter, the company has registered volume growth of 12% and 4% in MSW C&T business as well as MSW processing business respectively as compared to Q1FY22. Total compost sales for Q2FY22 stood at 2,908 tons compared to 4,850 tons in Q1FY22 and 3,327 tons in Q2FY21. MSW C&T sales are up by 11% to Rs. 105 Cr in Q2FY22 as compared to Rs. 95 Cr in Q1FY22."

According to HDFC Securities, "MSW Processing sales are up by 4% at Rs. 38 Cr in Q2FY22 as compared to Rs. 36 Cr in Q1FY22. The management has informed that the groundwork / pre-operating activities at the Greater Noida bio-mining project are progressing well and they are expecting that it will start contributing to revenue from the current quarter. Total Operating Revenue for Q3FY22 has improved by approximately 22% YoY, and on a sequential basis, has remained stable. Total tonnage handled by C&T Business has reported around 13% growth YoY and 3% QoQ, while total waste processed by the Company during Q3FY22, has improved by 6% YoY and 4% QoQ. Total compost sales during Q3FY22 stood at 3,144 tons as compared to 2,908 tons in Q2FY22 and 2,291 tons in Q3FY21."

Buy With A Target Price of Rs.406

According to the research report of the brokerage "We are enthused about the potential of the MSW segment and AWHCL being one of the prime players here could be a beneficiary of this. The company has reported a strong advance Q3FY22 business update, where operating revenue has improved by 22% YoY driven by improvement in tonnage handled and processed by the company. Compost sales have also been improving. The multiple years' order nature of the business provides long-term revenue visibility for the company. The WTE plant will start generating revenue from FY24E, which will improve the processing revenue. We have envisaged 17% CAGR for revenue over FY21-24E, where 64% is expected to be contributed by C&T MSW, 26% would come from MSW Processing and remaining from other businesses. We expect the company to deliver EBITDA/PAT CAGR of 16%/23% over FY21-24E."

HDFC Securities has further claimed in its research report that "AWHCL has been seeing a gradual reduction in debt despite CAPEX needs. We have estimated the debt to equity ratio at 0.25x for FY24E from 0.43x in FY21. Operating efficiencies and prudent capital management techniques have helped the company in maintaining the return ratios at around 15% in the past two years and we feel that AWHCL could maintain this trajectory for the next 2-3 years also. Management has guided that they expected the company to grow by 20-25% CAGR over the next 2- 3 years and there could be strong growth in the order wins during the same time. The company is trading at a decent valuation of 14x / 11.3x FY23E /FY24E adjusted earnings. We feel investors can buy AWHCL between Rs.330-336 (11.9x Dec-23E EPS) & add more on dips of Rs.294 (10.5x Dec-23E EPS) for the base case fair value of Rs.378 (13.5x Dec-23E EPS) and for the bull case fair value of Rs.406 (14.5x Dec-23E EPS) over the next two quarters."

Disclaimer

The above stock has been picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.