ICICI Direct recommended hold rating on VA Tech Wabag with a target price of Rs 295 in its research report dated February 12, 2019.
ICICI Direct's research report on VA Tech Wabag
VA Tech Wabag (Wabag) reported dismal Q3FY19 numbers Wabag’s revenues fell 23.5% YoY to Rs 661.9 crore. Lower topline was due to muted execution in both domestic (down 2.3% YoY) & overseas segment (down 23.4%YoY). Overseas segment contributed ~66% whereas domestic segment contributed ~33% to the topline Absolute EBITDA declined 36.5% YoY to Rs 49.3 crore. EBIDTA margins came in at 7.4% vs. 9% YoY. Lower margins were mostly on account of provisioning of doubtful debts in ‘other expenses’ in addition to forex (translation) loss during the quarter Wabag’s finance cost increased 32% YoY on account of higher interest cost for working capital. Accordingly, Wabag’s net profit declined 48.9% YoY to Rs 15.4 crore.
Outlook
With strong execution capabilities, we expect revenue, EBITDA and PAT CAGR of 15.4%, 13.7% and 15.1%, respectively. We value the company at 8x FY21E earnings to arrive at a target price of Rs 295. We maintain HOLD rating on the stock.
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