VAW is trading at 19.0x and 10.6x, FY20E and FY21E earnings respectively. In view of the long term growth potential in water and waste water treatment and reasonable valuations, we maintain rating at “ADD” with price target of Rs 300 (earlier Rs 335), valuing the stock at 15x average EPS of FY20E & FY21E (earlier 13x FY20 earnings).
On the order backlog front, we expect order book to grow at 22.6% CAGR in FY19-21E. We expect revenue, EBITDA and PAT CAGR of 20.2%, 29.4% and 29.8%, respectively. Receivables from Genco projects continue to remain a concern, which is now at Rs 415 crore, (of which | 115 crore is expected by Q2FY20E). Delay in receivables has strained the balance sheet. Wabag may also have to raise additional capital to fund its liability mismatches. Accordingly, we remain cautious on the company. We value the company at 11x FY21E earnings to arrive at a target price of Rs 270. We recommend REDUCE on the company.
VAW is trading at 13.7x and 11.4x, FY20E and FY21E earnings respectively. In view of the long term growth potential in water and waste water treatment and reasonable valuations, we move rating to “ADD” (earlier BUY) with price target of Rs 335 (earlier Rs 338), valuing the stock at 13x FY21E (earlier 13x FY20 earnings).