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Kolkata: It's literally an instance of waste to wealth. Motilal Oswal has not only initiate a "Buy" call on this stock but also signaled a 70% upside in the stock. The stock in question is VA Tech Wabag, a Chennai-based company that specialises in the domain of designing, constructing and operating wastewater projects. The looming challenge to recycle water all over the world has led to a bright outlook for this company which renders sewage/wastewater reusable and environmentally safe.
The brokerage firm has attributed its optimism on this company due to its constantly rising order book, rising margins/return ratios and strong cash flow generation. The brokerage has mentioned how environmental regulations and the need to treat waster water, especially in the industrial sector, has contributed to the prospects of this company.
The order pipeline of VA Tech Wabag stands out among its bright spots. According to Motilal Oswal, the value of the order book of the firm is Rs 137 billion, which is 420% of the firm's total revenue in FY25. There is an additional Rs 150-200 billion which is in the bidding stage. Disaggregating the order book, Motilal Oswal has said that it consists of both operation and maintenance projects (39%, with execution cycles ranging from 5-20 years) and EPC projects (52% with two-three year cycles). It has led the brokerage has expected a revenue growth of 15–20% in the coming three-four years.
The company is focused on bidding for projects that can generate margins and strong cash flows. The brokerage has also highlighted the return ratios and their improvements. RoCE (return o capital employed) and RoIC (return on invested capital) have surged from 11% and 12% in FY19 to 20% and 28% in FY25. RoE (return on equity) has risen 8–9% reported until FY22 to 13.8% in FY25. Motilal Oswal predicts that in the FY25–28E period RoCE can rise form 20% to 24%, RoE from 14% to 16% and RoIC from 28% to 39%.
The stock was trading at Rs 1,622.70, up 29.70 (or 1.86%) around 10 AM on July 24. In a bull scenario, Motilal Oswal predicts VA Tech Wabag’s stock to touch Rs 2,564 which is 58% higher compared to its price on Thursday. In the base case scenario, the target price has been set at Rs 1,900. In a bear market, the price of the stock could dip to Rs 1,318 said Motilal Oswal.
The 52-week high and 52-week low prices of the stock are Rs 1,944.00 and Rs 1,114.00 respectively. Rekha Jhunjhunwala, late investor Rakesh Jhunjhunwala's wife, is reported to have a stake of 8.04% stake in this company at the end of Q1 of FY26.
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