As part of its bull case projection, the brokerage has ascribed a price target of ₹2,564 on VA Tech Wabag, which implies a potential upside of 73% from current levels. As part of this scenario, it expects a revenue, EBITDA and PAT CAGR of 22%, 28% and 30% respectively.
The brokerage believes the company has a robust growth outlook ahead on the back of a strong order book, improving margins and return ratios and health free cash flow (FCF) generation, making it a cash-rich firm. Also, any large order inflows and a significant expansion in margins could drive valuation re-rating in the medium term, Motilal Oswal added.VA Tech Wabag follows an asset-light model with high focus on engineering and procurement (EP) and operations and maintenance (O&M) works, with research and development (R&D) centres in Europe and India and over 125 intellectual property rights.
Despite being eligible to execute large critical projects globally, the company is selective in bidding — with focus on margins and cash flows — and has a 25% – 30% win ratio, Motilal Oswal said.
The brokerage expects VA Tech Wabag’s revenue, EBITDA and Net Profit to grow at a Compounded Annual Growth Rate (CAGR) of 17%, 22% and 23% respectively over financial year 2025-2028.VA Tech’s current order book of ₹13,700 crore, which is 4.2 times its revenue of the previous financial year, coupled with a strong bid pipeline of ₹20,000 crore, could provide a 15% to 20% revenue growth visibility over the next three to four years, as per the company’s management.
The company’s focus on large-scale projects in high margin segments augurs well for margins, it added.
Motilal Oswal expects VA Tech Wabag to sustain strong free cash flow generation with an average of ₹350 crore annually over Financial year 2025 – 2028, given its robust operating performance and scope for further improvement in the working capital cycle, it said.
Over the next three years, Motilal Oswal expects further expansion in VA Tech Wabag’s return on capital employed from 20% to 24%, return on equity from 14% to 16%, and return on invested capital from 28% to 29%, above its guided range.
All eight analysts that have coverage on the stock have a “buy” rating.
Shares of VA Tech Wabag gained 2.7% to hit an intraday high of ₹1,559.9 apiece on Tuesday, July 22. The stock was up 1.98% at 1,547.8 apiece at 11.25 am. While it has gained 4.6% in the past month it has declined 7.6% this year, so far.
Also Read: Tata Power shares fall on Mundra power plant shutdown as Section 11 not extended
