This beaten-down Jhunjhunwala stock is up 20% in a week. Can it rally more?

New Delhi: After a steep decline, water treatment company VA Tech Wabag has been on a high lately, thanks to strong order wins.

The company is among ace investor Rakesh Jhunjhunwala's top bets as his better half Rekha Rakesh Jhujhunwala owned 50 lakh equity shares or an 8.04 per cent stake in the company as of March 31, 2022.

Order wins
On Friday, the company announced its first order win from Senegal worth about $146 million (about Rs 1,133 crore) to provide a safe and stable water supply to the people of Senegal by ensuring a highly sustainable water source.

It would be the largest seawater desalination plant in Senegal and the largest in West Africa upon completion. Also, it is the first order win by the company in the African region.

Earlier this week, the company had bagged an 18 million euro (about Rs 150 crore) order from Russia. The order was bagged from Korea-based DL E&C Co. towards a water treatment package for the EuroChem methanol production facility in Kingisepp, Russia.

Wabag’s scope includes design, engineering and supply, installation, pre-commissioning, commissioning and start-up of the plant, which is scheduled to be completed over a 15-month period.

Stock movement
Despite a muted performance in 2022, Jhunjhunwala-owned stock has risen about 20 per cent in the last seven sessions. However, the counter is almost flat in the last one year.

If compared to its 52-week high of Rs 404.25, hit in August last year, the counter is down almost down by 45 per cent. On Friday, the scrip had gained 10 per cent to Rs 274.55.

Financial performance
For the quarter ended March 31, 2022, the company reported a flat consolidated net profit of Rs 46 crore, while its total income fell 10 per cent to Rs 902 crore.

For the entire financial year 2021-22, the company reported a consolidated PAT of Rs 132 crore as against Rs 110 crore in the previous fiscal.

Total income of the company increased by 6 per cent to Rs 3,012 crore from Rs Rs 2,843 crore in FY21, driven by the sustained execution momentum.

Brokerage Outlook
Va Tech Wabag is on an improving revenue and earnings growth trajectory as concerns of high leverage, led by increasing working capital now behind it, said brokerage firm ShareKhan with a buy call and a target price of Rs 333.

A well-funded strong order book provides comfort on execution and collections going ahead, it added. "The government’s focus on water-related investments provides healthy order intake tailwinds for the company going ahead."

Another domestic broker YES Securities has set a Rs 391 target on the counter, signalling a 56 per cent upside. The brokerage had listed six reasons to invest in the counter.

Global brokerage Nomura also has a 'buy' rating on VA Tech Wabag but it has trimmed the target price to Rs 448 from Rs 634 earlier. It has also significantly trimmed its EPS forecast for FY23 and FY24.



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