VA Tech Wabag - Review

[chetan]

Here is Sharekhan's Review of VA Tech Wabag,

The company is strengthening its base in India and is setting up local presence in the target markets that are low-cost destinations and would help bring down the company’s dependence on Austria and Switzerland for servicing. The share of O&M revenues in the overall revenues is expected to increase as the company wins more TOT, BOOT and DBO contracts. The share has improved from 7% in FY2008 to 17% in FY2010. The operating profit margin of the consolidated business has improved to 9.1% in FY2010 from 5.4% in FY2009 and that of the stand-alone business has expanded to 11.6% in FY2010 from 5.9% in FY2009.

At the lower and upper ends of the price band of the issue, the stock is offered at 26.3x and 27.8x FY2010 earnings respectively. We believe that the initial public offering of the company, which is the only focused water and waste water treatment company in India with a strong brand, technological backing and healthy execution track record, presents a good long-term investment opportunity.

[sunil]

HSBC has the following review on this public issue,

V A Tech Wabag is pure play on Water industry, VTWL’s strong order book of Rs. 27.8bn as of June 30, 2010, which is 2.3x of FY10 total income, which provides a good revenue outlook for the company over next 2 years. VTWL’s is financially strong company, asset light base model coupled with good cash position of Rs2.2bn. At the price band of Rs 1,230-Rs 1,310, the stock is valued at 23.5x-25.0x its FY10 earnings of Rs52.3, which is cheap as compared to average P/E for the sector which is 41.7x on their FY10 earnings. Based on valuation and descent prospectus for water management industry, We recommend our investor to Subscribe to the issue with long term view.

[sunil]

Ventura Securities' Views on the IPO,

VA Tech Wabag is a multinational player in the water treatment industry and offers complete life cycle solutions including conceptualization, design, engineering, procurement, supply, installation, construction and O&M services for sewage treatment, processed and drinking water treatment, effluents treatment, sludge treatment, desalination and reuse for institutional clients like municipal corporations and companies in the infrastructure sector. The company is technology focused with R&D centers in India and owns 157 product and process patents.

The Order Book as on June 30, 2010 stands at Rs. 2,779.6 crore (2.3x FY10 revenues) on a consolidated basis of which 83% was attributable to municipal clients and 17% to industrial clients. The average period for the execution for EPC projects is between 18 to 24 months and for O& M projects is between one and 10 years.

VA Tech WABAG is valued at 23.1x its P/E and 24.6x at the lower & upper price band respectively. The company has RoNW which is well above the peer group average and a competitive P/E ratio that gives a strong signal of growth.

[sunil]

Edelweiss has the following Recommendation on the IPO,

VTW has a unique business model of strong growth with low cap-ex and limited working capital requirement. Company has RoCE of 24% and top-line and bottom-line growth of 42% and 119% in last two years. Company is likely to maintain CAGR of 30% and has cash holdings of INR 204 cr. which are likely to improve by 100 cr. post the IPO. The company is expected to do EBIDTA in excess of INR 200 cr. by FY12 and is available at 5.0X EV/EBITDA of FY12. The excellent business model, rich cash position and reasonable valuation makes the stock a good buy with significant upside potential. We recommend subscribe with a target of INR 1990 at 7.5x EV/EBITDA FY12E.

[sunil]

Networth has the following recommendation on the IPO,

Taking into consideration, Strong execution track record and Order Book, Wabag brand, Strong Revenue and PAT growth and tremendous potential in sector, VA TECH WABAG seems to be a promising player. At the Upper price band, Stock is VAlued at P/Ex of 27 its FY2010 EPS of RS 48.4 on post issue diluted basis, we believe that the issue is attractively VAlued considering the growth potential, therefore we advise investors to Subscribe to the issue.