This Jhunjunwala stock delivered multibagger returns in three years; can it hit Rs 636 mark?

Shares of VA Tech Wabag Ltd have delivered multibagger returns in the last three years. The stock of the water treatment firm, which closed at Rs 145.5 on August 18, 2020, rose to a high of Rs 498.50 on August 18, 2023 on BSE. An amount of Rs 1 lakh invested in the VA Tech Wabag stock three years ago would have turned into Rs 3.42 lakh today. In comparison, Sensex has risen 68.57 per cent during the period. The stock has risen 50.15% this year and rallied 95.76% in a year. 

Late investor Rakesh Jhunjhunwala's wife Rekha Jhunjhunwala held 8.04% stake or 50 lakh shares at the end of June 2023 quarter.  

VA Tech Wabag stock closed 2.22% lower at Rs 498.50 in the previous session. It slipped intraday to Rs 496 on BSE.  Market cap of the firm fell to Rs 3100.19 crore. The stock hit a 52 week low of Rs 240 on August 24, 2022 and a 52 week high of Rs 544.80 on August 1, 2023. Total 0.41 lakh shares of the firm changed hands amounting to turnover of Rs 2.10 crore on BSE.   

Two promoters held 19.13 per cent stake in the firm and 94,017 public shareholders owned 80.87 per cent for the quarter ended June 2023. Of these, 88615 resident individuals held 2.09 crore shares or 33.63% stake with capital up to Rs 2 lakh. Only 16 resident individuals with 15.26% stake held capital above Rs 2 lakh for the quarter ended June 2023.     

In terms of technicals, the relative strength index (RSI) of VA Tech Wabag stands at 45.1, signaling it's trading neither in the overbought zone nor in the oversold zone. VA Tech Wabag stock has a one-year beta of 1.2, indicating very high volatility during the period. VA Tech Wabag shares are trading higher than the 100 day, 150 day and 200 day but lower than the 5 day, 10 day, 20 day and 50 day moving averages.       

VA Tech Wabag logged a 65.33 percent rise in net profit at Rs 49.6 crore for the quarter ended June 2023 against a consolidated net profit of Rs 30 crore in the corresponding period of the previous fiscal. It posted a net loss of Rs 111.9 crore in the previous quarter. Revenue from operations slipped to Rs 552.8 crore in Q1 from Rs 631.7 crore in the year-ago quarter. 

Profit before tax (PBT) rose to Rs 64 crore in Q1 FY24 from Rs 39.20 crore in Q1 FY23. 

ICICI Securities has maintained its buy call on the stock and revised its price target to Rs 612 per share post Q1 earnings.  

“Ordering opportunity in the water segment is likely to remain strong  on  the back  of:  a) Namami  Gange phase-2  project,  b)  order  inflow  from industries  due  to  ‘zero  liquid  discharge’  requirements,  c)  pick-up  in  water desalination  and  water  treatment  plants  in  overseas  markets,  especially  Middle East and Russia. Wabag is looking to drive growth by focusing on desalination and water reuse segments where competitive intensity is low. Moreover, the book to bill  ratio  of  4x  FY23  revenues  (highest  in  its  history)  bodes  well  for  revenue visibility. We introduce FY25 estimates and maintain BUY with revised target price of Rs 612 per share, ” said ICICI Securities.  

YES Securities has maintained its buy rating on the stock with a target price of Rs 636.  

“Given the growing attention of the government and multi-lateral funding agencies towards an escalating water shortage crisis, the water treatment sector is well poised for a secular, long-term growth. In our view, the company’s robust order book thriving on strong market leadership, execution ramp up, operational efficiencies would help it capitalise on the forthcoming opportunities. At the current market price, the stock trades at a P/E of 12.2x/ 10.4x on FY24E/25E earnings estimates. We maintain our BUY rating on the stock with a target price of Rs 636 based on 13x PE on FY25E earnings,” said YES Securities.  

VA Tech Wabag Limited is engaged in the water treatment field. The company's principal activities include design, supply, installation, construction and operational management of drinking water, waste water treatment, industrial water treatment and desalination plants. It provides solutions for drinking water treatment, industrial and process water treatment, water reclamation, sea and brackish water desalination, municipal waste water treatment, industrial waste water treatment and sludge treatment.  

 

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