VA Tech Wabag - Turning Water Problems Into Business Opportunities: Yes Securities

Yes Securities Report

In our view increasing levels of water treatment will be an expanding area in the coming years given rising water scarcity and growing demand across sectors. There are significant low hanging fruit opportunities around water treatment with less than 30% of water being recycled.

Water treatment covers the processes used to make water more acceptable for a desired end-use, such as drinking water, usage or re-usage by industry, in irrigation, or return to the natural environment and this market is barely tapped. The goal needs to be to move to best-practice levels of water reuse of up to 75%.

Given the growing attention of the government towards escalating water shortage crisis and demand from industries for zero liquid discharge requirements, water treatment sector is well poised for long term growth.

In our view VA Tech Wabag Ltd.’s robust orderbook thriving on strong market leadership leading to healthy revenue visibility, execution ramp up and operational efficiencies would help it capitalise on the forthcoming opportunities.

At current market price, the stock trades at a price/earning of 11.1 times/ 9.5 times on FY24E/25E earnings estimates. We maintain our 'Buy' rating on the stock with a target price of Rs 636 based on 13 times PE on FY25E earnings.

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