Nomura, a brokerage and research firm, sees a lot of upside in the shares of Va Tech Wabag, a water treatment company, and has kept its Buy rating on the stock. Va Tech Wabag is an international water treatment company with headquarters in Chennai. The Wabag group is a global leader in pure play water technology with a focus on emerging countries.
In a result note on Va Tech Wabag, Nomura stated that the company's Q1FY22 performance was substantially in line with expectations. Due to commodity costs and an extended stay at project sites due to the breakout of the second wave of COVID-19, the company's sales and EBITDA margins were in line. The company's management stated that without the influence of the COVID-19 second wave, revenues would have been 10-15 percent higher and EBITDA margins would have increased by 150 basis points. The management also stated that the government's focus on flagship missions such as Jal Jeevan, AMRUT, and Namame Gange is continuing, and that further high-profile desalination projects, such as the Chennai desalination project, are in the works. The higher-margin industrial category has also been resurrected, with oil and gas holding promising potential.
The Va Tech Wabag stock has retained its ‘Buy' rating from Nomura, with a target price of $546 per share, representing a more than 50% indicated upside. According to the brokerage firm, order prospects are strong, and a focus on industrial orders could help boost EBITDA margins (earnings before interest, taxes, depreciation, and amortisation). However, important concerns include a slowdown in domestic water investment and a steep rise in commodity costs, according to the report.
Rakesh Jhunjhunwala owns 8.04 percent of the company's stock, or 50,00,000 shares, according to the BSE shareholding pattern as of the June 2021 quarter. Jhunjhunwala is a Chartered Accountant who runs the asset management firm Rare Enterprises and invests in his own name as well as his wife's, Rekha Jhunjhunwala's.
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