Analysts on Dalal Street see up to 80% upside in the sewage and water treatment solutions provider VA Tech Wabag, citing management’s focus on cash flows. Shares of the company have already rallied 15% to Rs 307.35 during the past one month, while the benchmark BSE Sensex has gained nearly 6% during the same period.
The stock is widely followed by retail investors. Ace stock picker Rakesh Jhunjhunwala’s wife Rekha Jhunjhunwala held over 8% stake in the company as of March 31. Besides, the country’s biggest mutual fund house SBI Mutual Fund also had over 2.50% stake in the company, while foreign portfolio investors had 14.61%.
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Nomura has a ‘Buy’ rating on VA Tech Wabag with a price target of Rs 546, indicating an upside of around 78% from the current market price. “We view VA Tech as a combination of value and strong growth. Further, we think the company with its operations focused on clean water technology and having a strong balance sheet and technology credentials, fits well into the ESG sector,” the Japanese brokerage firm said, adding FY21 demonstrates that past concerns on execution and rising debt levels are largely behind.
Phillip Capital is also positive on VA Tech with a price target of Rs 380. “We believe the scope for robust order inflows in FY22 and the management’s focus on cash flows permits a re-rating,” it said.
On the other hand, the brokerage highlighted that the management refrained from providing an order inflow and revenue guidance for FY22. However, it does expect a robust pipeline of projects, particularly in the international and industrial segments to fructify as orders over the next 12 months.
ICICI Securities added that the financial closure of the Namami Ganga project and pick-up in domestic execution provide growth visibility. The stress on working capital continues and provision towards doubtful debtors is likely to limit margin upside. “Order prospects are promising, which is likely to support FY23E earnings,” ICICI Securities said.
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