Multibagger stock up 105% in 2024; 10% further upside likely, says ICICI Securities

Shares of multibagger VA Tech Wabag Ltd have delivered 105 per cent return in 2024 so far, taking their one-year rise to 157 per cent and five-year surge to 349 per cent. The company's management has maintained its guidance of 15–20 per cent revenue growth in FY25 and also kept its order inflow guidance of Rs 6,000–8,000 crore for the financial year. VA Tech Wabag expects FY25 order book at Rs 16,000-18,000 crore. 

ICICI Securities upped its target price on the stock to Rs 1,445 against an earlier target of Rs 1,185. The scrip closed at Rs 1,306 on Tuesday, down 1.52 per cent. ICICI Securities target price on the stock suggests a 10 per cent potential upside over this price. 

"Wabag’s PAT performance and guidance of sustained high Ebitda margins, has led us to believe that the company would be in a favourable position going forward. The management has also guided for 15 per cent revenue growth for FY25, and an Ebitda margin of 13–15 per cent. We believe this guidance is well within the reach and is likely to fructify," ICICI Securities said. 

VA Tech Wabag, which offers total water solutions to industries and municipalities,  has also guided for an order backlog of three years. It has submitted bids worth Rs 8,400 crore, ICICI Securities said as it maintained 'Buy' on the stock and based its target price on 25 times FY26 earnings.

Continued lower order inflows in FY25 and increased operating costs are two key risks, the brokerage said.

VA Tech Wabag’s revenues grew 13 per cent YoY in Q1; its Ebitda margin came in at 13 per cent, up 110 basis points YoY. Order inflow was subdued for the quarter but VA Tech Wabag said it is the preferred bidder for Rs 6,000 crore worth of projects, which is likely to get finalised in the next couple of quarters. 

"Note that OI in FY24 was subdued at Rs 2,400 crore. Order book (OB) at the end of the quarter closed at Rs 9,500 crore – Rs 5,200 crore of EPC (2.2 times EPC revenues) and Rs 4,200 crore of O&M. A strong OI in the near term remains critical for sustained growth of 15–20 per cent in revenues. We estimate an OI of Rs 6,000 crore in FY25E. Maintain BUY with a revised target price of Rs 1,445, ICICI Securities said.