VA Tech Wabag rises over 4% after SC’s order on release of waste in water bodies
Mumbai: Stocks of VA Tech Wabag, a company engaged in water treatment closed 4.3 per cent higher on Wednesday after a ruling by the Supreme Court to curb the release of untreated waste in water bodies by industrial units.
Analysts said the company’s stock was driven by sentiment surrounding the news, since up to 60% of its business came from municipal bodies in the country. However, the volume of business emanating from the curb may not be substantial, they said.
A Supreme Court bench on Wednesday directed industrial units to install primary effluent plants within 3 months. If they fail to do so state pollution control boards will direct concerned electricity supply boards to disconnect power supply to them.
VA Tech Wabag’s stock has seen a 20% increase since December and analysts expect a further 15% increase in the coming weeks driven by resolution of bottlenecks in its overseas projects.
“This is a pedigree company in the water treatment industry and most of the negatives are behind it in terms of drag from liquidated damages of the Oman Desalination project, low/no margin AP Genco project and improvement in working capital cycle,” said Nishna Biyani, analyst at Prabhudas Lilladher. The brokerage has a target price of Rs 594 on the stock.
The company suffered a loss to the tune of Rs 643 million from the Oman desalination project in the last quarter. VA Tech’s stock price has fallen from Rs 800 levels in 2015 to the current Rs 547 after a slowdown in the Middle East business. It trades at 30 times its 2017 earnings.
“Investors expect the company will now begin FY18 on a clean slate and get back on earnings growth trajectory,” said Biyani of Prabhudas.
Analysts said a strong order book growth increased the company’s revenue visibility for the next 3 years. Orders from the government’s Namami Gange Project are also expected to take off in the next 3 months.
Analysts said the company’s stock was driven by sentiment surrounding the news, since up to 60% of its business came from municipal bodies in the country. However, the volume of business emanating from the curb may not be substantial, they said.
A Supreme Court bench on Wednesday directed industrial units to install primary effluent plants within 3 months. If they fail to do so state pollution control boards will direct concerned electricity supply boards to disconnect power supply to them.
VA Tech Wabag’s stock has seen a 20% increase since December and analysts expect a further 15% increase in the coming weeks driven by resolution of bottlenecks in its overseas projects.
“This is a pedigree company in the water treatment industry and most of the negatives are behind it in terms of drag from liquidated damages of the Oman Desalination project, low/no margin AP Genco project and improvement in working capital cycle,” said Nishna Biyani, analyst at Prabhudas Lilladher. The brokerage has a target price of Rs 594 on the stock.
The company suffered a loss to the tune of Rs 643 million from the Oman desalination project in the last quarter. VA Tech’s stock price has fallen from Rs 800 levels in 2015 to the current Rs 547 after a slowdown in the Middle East business. It trades at 30 times its 2017 earnings.
“Investors expect the company will now begin FY18 on a clean slate and get back on earnings growth trajectory,” said Biyani of Prabhudas.
Analysts said a strong order book growth increased the company’s revenue visibility for the next 3 years. Orders from the government’s Namami Gange Project are also expected to take off in the next 3 months.
