Stock to Buy: Small Cap Water Treatment Stock Is Up By Upto 50.77% From 52-Week Low, Sharekhan Suggests A Buy

VA Tech Wabag, a small cap water treatment company is a recommendation from leading broker Sharekhan. The brokerage feels that there is significant potential to earn good gains from this player, as it is operating in a niche market.

Waste Water treatment demand outlook

The rising urbanisation in major large Indian cities has created a demand for waste water facilities to make fresh portable water available for the rising population. In the coming years, desalination is expected to be a prominent technology for water filtration due to the rising scarcity of fresh water in India. The global water and waste water treatment market is estimated to reach a size of $211 billion by 2025 at a CAGR of 6.5% over 2019-2025. While India's water and waste water treatment technology market is partially consolidated. Rising demand for water-treatment facilities across the world will have a positive impact on the market's growth in the coming years.

Va Tech Wabag Ltd's Robust Order book

In the Sharekhan brokerage report, it is given that the company has shown its competence by having a robust order book and is focused on margin improvement. Va Tech is focusing on quality, technologically advanced, and well-funded industrial as well as engineering and procurement orders to improve profitability and cash flows on a sustainable basis. The company had robust order intake at Rs. 1,886 crore in 9MFY2023. Order book stood at Rs. 8,878 crore. Out of the total order intake, 68% came from the rest of the world and 32% came from India. Industrial order constituted 55% of the total intake, while municipal orders had a lower share at 45%. From the domestic market, nearly Rs 5,000-5,500 order is visible, including various government initiatives such as Namami Gange, Swachh Bharat Mission, and Jal Jeevan Mission.

Buy shares of VA Tech Wabag Ltd, with a target price of Rs 420 per share

The brokerage believes, that the company has a well-funded strong order book provides comfort in execution and collections going ahead. Based on the strong order book outlook, brokerage sees a potential gains of upto 28.44% from the stock of this small cap company. "We believe with a strong order pipeline and focus on margin improvement and cash flow generation, the company is on the cusp of a healthy growth trajectory, backed by its better quality order book. The company is optimistic about growth opportunities present in desalination, ZLD, and water treatment solutions in both domestic and export markets. A well-funded, strong order book provides comfort in execution and collections going ahead. At the stock price of Rs 327 per share, the stock trades at P/E of ~11x its FY2024E earnings, which we believe is undemanding, given an optimistic outlook on business and earnings. Hence, we maintain our Buy rating with an unchanged price target of Rs. 420."

Price movement of Va Tech Wabag Ltd Shares

Current market price of Va Tech Wabag stock is Rs 331.70 per share, declined by 0.42% on intraday basis. It has rallied by 50.77% from 52-week low price of Rs 220 per share, while its 52-week high is at Rs 374.90 per share. In one year it moved up by 3.03%, but in three years its rallied by upto 64.17%.

About Va Tech Wabag Ltd,

Va Tech Wabag Ltd, an Indian multinational company with headquarters in Chennai, India. Founded in Breslau in 1924, the company is focussed on desalination and water treatment for municipal and industrial users. It has a successful track record of executing over 6000 municipal and industrial projects globally with quality and commitment to timely delivery and has presence across more than 20 countries. Its current market capitalisation is Rs 2,058.50 crore.

Disclaimer:

The stock has been picked from the brokerage report of Sharekhan. Greynium Information Technologies and the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.