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Our Rating: OBSERVE & HOLD
Mehabe score: 2 G Factor: 3 Piotski Score: 7 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 3 and Piotski score of 7.
Description
Va Tech Wabag is engaged in the business of water treatment field. Companys principal activities include design, supply, installation, construction and operational management of drinking water, waste water treatment,industrial water treatment and desalination plants.
Main Points
Order book #
As of Dec’20, Company has an order book of ~Rs. 10,700 cr spread over next 3 years. Major orders are from Middle East, Africa, India, Switzerland and Romania #Site:WABAG
Market Cap:
Rs 1,758 cr
Price:
283.0
Trading pe:
16.0x
Book-value:
227/share
Div yield:
0.00 %
Earning yield:
12.01%
Face-value:
2.00/share
52week high:
304.80
52week low:
101.30
Technical Analysis
Stock trades at 283.0, above its 50dma 257.9. It also trades above its 200dma 223.25. The stock remains bullish on techicals
The 52 week high is at 304.80 and the 52week low is at 101.30
Price Chart
P/E Chart
Sales and Margin
Strengths
– has reduced debt.
Weakness
– Though the company is reporting repeated profits, it is not paying out dividend
-The company has delivered a poor sales growth of 2.48% over past five years.
-Promoter holding is low: 21.70%
– has a low return on equity of 8.71% for last 3 years.
-Contingent liabilities of Rs.622.50 Cr.
-Dividend payout has been low at 6.94% of profits over last 3 years
– has high debtors of 173.79 days.
-‘s cost of borrowing seems high
Competition
– The industry trades at a mean P/E of 24.4x. HLE Glascoat trades at the industry’s max P/E of 100.59x. WABAG trades at a P/E of 16.0x
– Industry’s mean G-Factor is 3.4 while the mean Piotski score is 8.0. WABAG has a G-Factor of 3 and Piotski scoreof 7.
– Average 1 month return for industry is 16.4%. The max 1- month return was given by Praj Industries: a return of 40.3 %
Quarterly Results
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 2834.0 cr for period ended Mar 2021 vis-vis sales of Rs 2557.0 cr for the period ended Mar 2020, a growth of 9.8%. The 3 year sales cagr stood at -6.4%.
Net Profit reported at Rs 110.0 cr for period ended Mar 2021 vis-vis sales of Rs 91.0 cr for the period ended Mar 2020, rising 17.3%.
Company reported a poor Net Profit CAGR of -5.9% over the last 3 years
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has had stable/constant Return on Equity (RoE) metric. The RoE on Last Year basis was 9.0% compared to 9.0% over the last 3 Years. – The stock has given a return of 152% on a 1 Year basis vis-vis a return of -11% over the last 3 Years. – The compounded sales growth on a TTM bassis is 11% vis-vis a compounded sales growth of -6% over the last 3 Years. – The compounded profit growth on a TTM basis is 21% vis-vis a compounded profit growth of -6% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Mar 2021 fii holding stood at 14.61% vis-vis 14.52% for Dec 2020 – Public shareholding has remained largely constant. The Mar 2021 public holding stood at 60.43% vis-vis 60.06% for Dec 2020
Conclusion
– has reduced debt. – Though the company is reporting repeated profits, it is not paying out dividend
-The company has delivered a poor sales growth of 2.48% over past five years.
-Promoter holding is low: 21.70%
– has a low return on equity of 8.71% for last 3 years.
-Contingent liabilities of Rs.622.50 Cr.
-Dividend payout has been low at 6.94% of profits over last 3 years
– has high debtors of 173.79 days.
-‘s cost of borrowing seems high
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 257.9 and is trading at 283.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
