Latest news with #VATW
Economic Times
22-07-2025
- Business
- Economic Times
Motilal Oswal predicts 25% growth in VA Tech Wabag shares, initiates coverage with ‘buy' rating; stock surges 4%
Dometic brokerage firm Motilal Oswal has initiated coverage on VA Tech Wabag (VATW), a leading water technology company, with a 'buy' rating and a target price of Rs 1,900, an upside potential of 25% from its previous closing price. ADVERTISEMENT Following the report, the stock rose 3.7% intraday on Tuesday, hitting a high of Rs 1,575 on the BSE. The target is based on a 26x FY27E P/E multiple, and is a premium to the historical average P/E of 18x, reflecting the brokerage's optimistic outlook on the company. VATW, with its strong order book, improving margins, and robust cash flow generation, is poised for substantial growth, according to Motilal Oswal's domestic brokerage firm sees VATW as a compelling investment opportunity, driven by the company's diversified and strong business model in the water treatment and management company is particularly well-positioned in executing large-scale projects in high-margin segments such as engineering, procurement, and construction (EPC), and operations and maintenance (O&M). ADVERTISEMENT Motilal Oswal emphasises that the company's focus on these areas augurs well for its margins and future brokerage firm also highlighted VATW's impressive order book, which stood at Rs 137 billion as of FY25, amounting to approximately 4.2x its FY25 revenue. This provides the company with visibility for 15-20% revenue growth over the next few years. ADVERTISEMENT The order book is rich in high-margin O&M (52% of total) and EPC (39% of total), sectors that offer long-term stability and strong cash flows. VATW's ability to secure marquee projects in the water sector, both locally and internationally, has strengthened its position as a leader in the industry. Also read: HDFC Bank shares jump 3% in 2 days after Q1 results. 5 reasons behind the move ADVERTISEMENT The brokerage noted that 'VATW's current order book provides strong revenue growth visibility for the next 3-4 years', which is expected to drive consistent revenue expansion and margin a CAGR of 17%-20% in revenue over FY25–28, VATW is set to capitalize on the growing global demand for water infrastructure and wastewater management. ADVERTISEMENT The global water and waste management market is a multi-decadal theme with emerging new areas, making VATW well-positioned to benefit from this long-term trend. Motilal Oswal underscores that the global market is expected to grow at a CAGR of 6%, reaching USD 576 billion by is set to capture a significant portion of this expanding market, especially as it is actively involved in large-scale projects that align with government initiatives in water conservation, wastewater management, and industrial water treatment.'The global water and waste management market is projected to grow at an 11% CAGR to reach USD 44 billion by 2029', Motilal Oswal noted, driven by rising water pollution, increasing environmental compliance, and water scarcity factors will fuel the demand for services that VATW offers, such as wastewater treatment, desalination, and water recycling Oswal also draws attention to VATW's strong free cash flow (FCF) generation, which is expected to average Rs 1.5 billion annually over FY25–28. This healthy cash flow, coupled with a net-cash position, supports further expansion and provides flexibility in funding capital focus on large-scale projects in the high-margin EPC and O&M sectors should continue to drive operating leverage and margin improvement over the medium term. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) (You can now subscribe to our ETMarkets WhatsApp channel)
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Business Standard
22-07-2025
- Business
- Business Standard
VA Tech share up 3% as MOFSL initiates coverage with 'Buy'; 25% upside eyed
VA Tech Wabag share price today: Shares of desalination and water treatment company VA Tech Wabag rose nearly 3 per cent to hit an intraday high of ₹1,559.9 on Tuesday, June 22, 2025, on the NSE after brokerage firm Motilal Oswal Financial Services (MOFSL) initiated coverage on the stock with a bullish outlook, driven by a robust growth outlook, strong order book and improving margins. The brokerage initiated coverage of VA Tech Wabag with a 'Buy' rating and a target price of ₹1,900 per share, implying a 25 per cent upside from Monday's closing levels of ₹1517.8. "We initiate coverage on VATW with a Buy rating and a target price of ₹1,900, based on 26x FY27E P/E (premium to historical average of 18x on improved outlook). We believe large order inflows and a significant margin expansion could fuel valuation re-rating in the near to medium term," the brokerage said in a note dated July 22. At 11:45 AM, the stock was trading at ₹1,544, up 1.73 per cent from its previous day's close. In comparison, the benchmark NSE Nifty50 was trading lower by 28 points or 0.11 per cent at 25,062.7 levels. Here are the key reasons why MOFSL is bullish on VA Tech Wabag: Water management - A multi-decadal theme According to analysts at Motilal Oswal, the global water and waste management market is estimated to reach $576 billion by 2032, from $329 billion in 2023 at a CAGR of 6 per cent. The key factors driving the growth include rising water pollution, increasing environmental compliance, water scarcity, and demand for wastewater services from industries. In addition, the large projects are backed by central governments, sovereign funds and multi-lateral agencies to support companies to execute with payment security, the brokerage said. VA Tech Wabag - A global leader in water technology With over 100 years of experience, VA Tech Wabag is the world's third-largest private water operator. The company has a presence in more than 25 countries in all major segments of water treatment, including drinking water, sewage, industrial, seawater desalination, and water recycling. With technical expertise and vast experience in executing large critical projects, MOFSL believes VA Tech Wabag is now qualified to independently bid for marquee projects globally. However, it is selective in bidding, with a focus on margins and cash flows, and has a win ratio of 25 per cent to 30 per cent. Solid growth strategy In 2023, the company launched a long-term comprehensive plan, 'Wriddhi', in response to the ever-evolving and complex global water treatment market. In the next 3-5 years, VATW's is expected to achieve and order book 3x of revenue, revenue CAGR of 15-20 per cent, Ebitda margin of 13-15 per cent, RoCE of more than 20 per cent, O&M mix at 20 per cent, RoE of over 15 per cent, and net-cash positive. Net cash company with healthy return ratios According to MOFSL, VA Tech Wabag has witnessed a turnaround in its free-cash flow (FCF) generation in the last five years, achieving a net-cash balance of ₹5.9 billion as of FY25 from net debt of ₹4 billion in FY19. The company's return on capital employed (RoCE) has almost doubled to 20 per cent in FY25 from 11 per cent in FY19. Return on invested capital (ROIC) has also increased to 28 per cent in FY25 from 12 per cent in FY19. The brokerage expects strong FCF generation (₹3.5 billion annually over FY25-28E) to sustain on the back of healthy operating performance and improvement in working capital cycle. It also expects further expansion in RoCE to 24 per cent, RoE to 16 per cent, and RoIC to 39 per cent, during the same period.
