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YES Securities sees 60% upside in this favourite stock of Rakesh Jhunjhunwala's. Time to invest?

YES Securities sees 60% upside in this favourite stock of Rakesh Jhunjhunwala's. Time to invest?

The ace equity investors held an 8.04 per cent stake in the company as of March 31, 2022.

For the latest quarter ended March 31, 2022, VA Tech Wabag posted a consolidated net profit (attributable to the parents) of Rs 46.07 crore, down 0.99 per cent against Rs 46.53 crore in the corresponding quarter a year ago. For the latest quarter ended March 31, 2022, VA Tech Wabag posted a consolidated net profit (attributable to the parents) of Rs 46.07 crore, down 0.99 per cent against Rs 46.53 crore in the corresponding quarter a year ago.

Growing attention of the government amid escalating water shortage crisis has brought the water treatment sector under the limelight. A company from the sector just hogged the limelight on Dalal Street after it received a ‘Buy’ call from YES Securities with a target price of Rs 391, indicating an upside of 60 per cent from the current market price of Rs 244.

This is one of Rakesh Jhunjhunwala's favourite stocks, VA Tech Wabag. The ace equity investors held an 8.04 per cent stake in the company as of March 31, 2022. On the other hand, foreign portfolio investors and mutual funds held 16.17 per cent and 3.41 per cent stake in the company.  

For the latest quarter ended March 31, 2022, VA Tech Wabag posted a consolidated net profit (attributable to the parents) of Rs 46.07 crore, down 0.99 per cent against Rs 46.53 crore in the corresponding quarter a year ago. Revenue from operation also declined to Rs 891.86 crore against Rs 999.25 during the same period. However, YES Securities said the bottom line of the company came above our expectations of Rs 38.9 crore mainly due to higher operating efficiency.

The brokerage in a report on May 30 said, “VA Tech Wabag’s reported a decent set of numbers with revenues marginally below estimates owing to a slowdown in the execution of few international orders with pressure on margins.” During FY22, the company bagged orders worth around Rs 3,650 crore taking the order book to Rs 10,100 (3.4x FY22 sales) as of Q4FY22.

Management indicated it would focus on improving the intake of international orders as these projects have sustainable margins and have a shorter execution timeline, which will help improve its cash flow.

Shares of the company have underperformed the benchmark equity index BSE Sensex during the past five years. The scrip plunged 63 per cent to Rs 244.10 on May 30, 2022 from Rs 668.45 on the same day in 2017. The 30-share Sensex gained nearly 80 per cent during the same period.

Commenting on VA Tech Wabag, YES Securities said, “VA Tech’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 price-to-earnings of 10.5 times and 8.7 times on FY23 and FY24 earnings estimates. We maintain our ‘Buy’ rating on the stock with a TP of Rs 391 based on 12 times P/E on FY24E earnings.”

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