VA Tech Wabag (Q1 FY14)

India Infoline News Service | Mumbai |

Revenues for standalone business increase by 10.5% to Rs1.2bn. Within standalone business, while revenues from India grew by strong 30% yoy, revenues from rest of the world declined by 8.4% yoy on the back of continuing slowdown in investment cycle across key geographies of the company.

CMP Rs444, Target Rs668, Upside 50.4%
  • The order book for VA Tech at the end of Q1 FY14 stood at Rs50.2bn. Domestic orders account for 71% of the overall order book. Contribution from EPC segment of the overall order book has increased by ~350bps on yoy basis. In terms of clientele, Municipal orders account for 73% of the order book. Total order inflows for the company jumped by 70% on yoy basis to Rs10.2bn for Q1 FY14. Framework orders stood at Rs1bn for Q1 FY14. 


  • Revenues for standalone business increase by 10.5% to Rs1.2bn. Within standalone business, while revenues from India grew by strong 30% yoy, revenues from rest of the world declined by 8.4% yoy on the back of continuing slowdown in investment cycle across key geographies of the company. On the consolidated basis, overall revenues witnessed robust growth of 23.9% yoy.  The strong growth in overall revenue was driven by healthy growth in both domestic and overseas revenues to the tune of 30% and 25.4% respectively on yoy basis. Key projects that contributed to the strong revenue growth includes: a) Al Gubrah Desalination Plant - Oman, b) RIL Dahej – ETP, c) Punj Lloyd waste water treatment plant and d) Petrobrazi - Romania.  


  • Operating profit margin for Q1 FY14 expanded by 65bps on yoy basis for standalone business, while it contracted by 10bps on yoy basis for the consolidated business. Change in margin is largely on account of change in execution mix for the projects. Management expects margins to improve in FY14 led by shift in business model for international operations from centralized structure to decentralize or Multiple Domestic Unit (MDU) structure.


  • We expect order pipeline to remain robust for both domestic and overseas market. Growth in domestic market will be driven by strong order awarding from TN for Chennai desalination plant and Mumbai for Mumbai Sewage Treatment plant. While in overseas market, order book will be driven by countries like Philippines, Turkey, Nepal, etc. Further we expect strong execution to result into robust revenue growth for the next two years. Margins for the company are expected to expand with increase in share of O&M segment as the O&M portion of Chennai Desalination plant commences. We maintain BUY recommendation and target price of Rs668.

Results table (standalone)
(Rs m)
Q1 FY14
Q1 FY13
% yoy
Q4 FY13
% qoq
Net sales
1,157
1,047
10.5
5,082
(77.2)
Material costs
(711)
(741)
(4.0)
(3,998)
(82.2)
Personnel costs
(186)
(156)
19.5
(181)
2.5
Other overheads
(161)
(68)
137.2
(131)
23.2
Operating profit
99
83
19.6
772
(87.2)
OPM (%)
8.5
7.9
65 bps
15.2
(665) bps
Depreciation
(17)
(14)
17.4
(19)
(10.6)
Interest
9
(0)
-
2
-
PBT
91
68
34.0
755
(88.0)
Tax
(30)
(22)
38.5
(244)
(87.6)
Effective tax rate (%)
33.3
32.2
-
32.4
-
Reported PAT
61
46
31.8
510
(88.1)
PAT margin (%)
5.2
4.4
85 bps
10.0
(481) bps
Ann. EPS (Rs)
9.1
6.9
31.8
77.0
(88.1)
Source: Company, India Infoline Research
 
Segmental results (standalone)
(Rs mn)
Q1 FY14
Q1 FY13
BSE 605.00 [7.15] ([1.17]%)
NSE 605.00 [9.05] ([1.47]%)

***Note: This is a NSE Chart

 

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