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Va Tech Wabag

Capita Telefolio beats BSE Sensex by almost 200%

Water infrastructure player

The technological powerhouse has presence in the entire value chain and global network
Va Tech Wabag, the leader in the Indian water technology market, currently holds a market share of around 50%. The company can point to over 100 reference ports at home and abroad include putting up Indias largest seawater reverse osmosis plant for Chennai Metropolitan Water Supply and Sewerage Board in Chennai and water treatment plant at the Delhi Commonwealth Games Village, Asias largest wastewater treatment plant at RILs Jamnagar refinery, Indias first wastewater recycling plant at IOCLs Panipat refinery, Indias largest lamella wastewater treatment plant for the Brihan Mumbai Municipal Corporation (BMC), the worlds largest tannery wastewater treatment plant at the Calcutta leather complex, one of the worlds largest membrane bioreactor technology wastewater treatment plants at AlAnsab in Muscat, Indias first ultra-filtration plant for treated wastewater at the Vizag Steel Plant, and Indias first wastewater treatment plant based on a build-own-operate-transfer model for Alandur in Chennai. Va Tech Wabags municipal business group (MBG) provides water and wastewater treatment solutions covering drinking water treatment plants, sewage schemes, industrial wastewater treatment plants and pumping stations. The MBG is a major contributor to revenue through engineering, procurement and construction (EPC) contracts in India. It is presently executing Indias largest municipal Rs 1,033-crore desalination project of 100 million litres per day at the Nemmeli plant of the Chennai Metropolitan Water Supply and Sewerage Board in Chennai together with the industrial water group (IWG) and the operations business group (OBG). Going ahead, MBG expects to grow its top line by 20% in the fiscal ended March 2013 (FY 2013) by enhancing productivity. The IWG unit executes water projects for large industrial clients (oil refineries, steel plants, and power plants) and provides plants for demineralisation, reverse osmosis, thermal-based desalination, condensate polishing, wastewater recycling, and zero liquid discharge. It expects to reinforce competitiveness and emerge as a specialised services provider with focus on the power, petroleum refinery and fertiliser sectors. The international business group (IBG) unit caters to water and wastewater treatment needs of municipal and industrial customers outside India (South East Asia, the Middle East and SAARC countries). It works together with Austrian subsidiaries in overlapping markets. The OBG unit provides operations & maintenance (O&M) services to Indian and international municipal corporations and industrial clients. The division services international clients in geographies covered by IBG. The services include organisation, staffing, supply of chemicals and consumables, supply of spares, major and minor repairs, and equipment replacement and plant refurbishment. These contracts provide steady revenue as they are typically longer (five-seven years) compared with EPC (18-30 months). The company is executing 56 contracts across 58 Indian and international locations. Consolidated sales grew 9% to Rs 230.98 crore and OPM expanded 1.1% to 4.5%, in the quarter ended June 2012 over the June 2011 quarter. The share of profit from associate companies and minority interest was Rs 21 lakh as against 17 lakh after which net profit stood at Rs 2.24 crore as against a loss of Rs 4.16 crore. Consolidated order intake was approximately about Rs 600 crore in Q1 of FY 2013. Consolidated order book stands at Rs 4110 crore, of which 67% is from India and the balance is from overseas subsidiaries. The firm order book of the EPC segment stood at Rs 2669 crore, while that of the O&M segment stood at Rs 1441 crore. In addition to the firm order book, it has framework contracts of Rs 861 crore. On receipt of advances, letters of credit, notice to proceeds, and achieving financial closure, these will form part of the order book. Va Tech Wabag is confident of maintaining its FY 2013 revenue guidance of Rs 1650 crore-Rs 1700 crore, translating into a growth of 15% to 18% over the year. The company is also equally confident of meeting its order intake guidance of Rs 2300 crore-Rs 2400 crore for the current fiscal. Va Tech Wabags resources are flexible in shifting to municipal to industrial and domestic to international markets and it is pursuing both organic as well inorganic growth. Net of cash, it is debt-free, which will help inorganic growth wherever strategic opportunities present themselves. We expect Va Tech Wabag to register consolidated EPS of Rs 34.2 in FY 2013. The share price trades at Rs 479. P/E works out to 14.

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Strong visibility

Va Tech Wabag is confident of its FY 2013 revenue growth guidance of 15%-18% over FY 2012 and order intake guidance of Rs 2300-Rs 2400 crore

Va Tech Wabag: Conso. Financials 1103 (12) 1203 (12) 1303 (12P)
Sales 1241.82 1443.52 1647.94 OPM (%) 9.7 9.0 9.7 OP 121.03 130.03 159.18 PBDT 106.25 119.64 145.60 PBT 96.27 111.05 136.37 PBT after EO 83.41 111.05 136.37 PAT 51.79 73.13 91.43 Net profit after MI 52.56 73.75 90.72 EPS (Rs)* 22.8 27.8 34.2 * EPS on post-issue equity capital of Rs 5.30 crore. Face Value: Rs 2. (P): Projections. EPS is after excluding EO (extraordinary items) and relevant tax. Figures in Rs crore. MI: Share of profit from associates and minority interest.
Source: Capitaline Databases

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Oct 15 28, 2012 CAPITAL MARKET