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Monday, February 27, 2012

Buy Stocks of Va Tech Wabag

Va Tech Wabag is from one of such sector which has good future prospects. It is from drinking water management and waste water treatment plants sector.

Business
VA TECH WABAG Limited (WABAG) is engaged in design, installation, supply and operational management of drinking water and waste water treatment plants. Four business units of company include Municipal Business Group, Industrial Water Business Group, International Business Group and Operation and Maintenance Business.

VA TECH WABAG provides services of engineering-procurement-construction (EPC) and O&M solutions for sewage treatment, drinking and industrial process water treatment, effluents treatment, sludge treatment, desalination and reuse. It’s clientele include municipal corporations and companies in the infrastructure sector, such as power, steel and oil and gas companies. The company has subsidiaries in Austria, Switzerland, Germany, Czech Republic, Romania, Macao, Algeria, Tunisia, Egypt and Turkey.

Strong Order Flows
Company’s order flows in 3Q FY12 are very encouraging for it’s numbers. Company has received order flows of almost Rs.530 crores. It has receved order flow of Rs.380 crores in first half year. This is big growth in terms of order flow in one quarter!

Company management has guided for FY 12 revenues of between Rs.1400 to Rs.1500 crores with stable EVITDA margin. For 3QFY12 the company reported 7% yoy decline in revenue and 27% fall in EBITDA with 190 bps yoy decline in EBITDA margin. But even at Rs.1400 crores revenue projected, it is a revenue growth of amost 23% in 4QFY12 and looking at current order book, it certainly looks achievable.

Va Tech Wabag has already received letters of awards in three BOT projects. Also, company is the lowest bidder in some of the projects and so may get a few more projects. This provides good opportunity of growth for company.

Va Tech Wabag may be looking for acquisition to expand it’s service offerings in near future. Also, if company receives more order in FY12 additional to estimated Rs.1800 crore order inflow. These developments would turn the outlook for stock more positive.

One may Buy Stocks of Va Tech Wabag with target stock price of Rs.490 over the time period of one year.

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