Shares of VA Tech Wabag hit a 52-week high as they rallied 12 per cent to Rs 374 on the BSE in Monday’s intra-day after the company announced it has secured industrial waste water treatment order in Romania worth about Rs 260 crore (30 million euros).
The stock surpassed its previous high of Rs 351.20, touched on November 29, 2022. At 09:57 AM, VA Tech Wabag was trading 11 per cent higher at Rs 370.65, as compared to 0.06 per cent decline in the S&P BSE Sensex. Trading volumes on the counter nearly tripled, with a combined 2.6 million shares, having changed hands on the NSE and BSE till the time of writing of this report.
The company said the contract will be an engineering & procurement (EP) scope contract which includes design & engineering, equipment supply, installation, commissioning and start-up of the Purolite Victoria WWTP. The project is scheduled to be executed over a 24-month period.
WABAG is a global leader in the water industry backed by rich experience spanning over 98 years. Being a pure-play water technology multinational, WABAG offers a complete range of technologies and services for Total Water Solutions in both Municipal and Industrial sectors.
Meanwhile, in the past one month, the stock has surged 35 per cent on stable outlook. In comparison, the S&P BSE Sensex was up less than 1 per cent during the period.
On November 24, rating agency India Ratings and Research (Ind-Ra) affirmed VA Tech Wabag’s long-term issuer rating at ‘IND A+’ with a stable outlook and upgraded the short-term debt rating to ‘IND A1+’ from ‘IND A1’.
“The short-term rating upgrade reflects the likelihood of a continued improvement in VA Tech Wabag’s liquidity position over the medium term, driven by a healthy outlook on its profitability and stabilisation of its working capital cycle,” the rating agency said in its rationale.
The company has strong revenue visibility with an outstanding order book as on September 30, 2022 of about Rs 9,200 crore (FY22: Rs 9,800 crore), which is around 3x of its annual revenue of FY22. The company also has a framework contract of Rs 1,100 crore.
The operations and maintenance contracts form about 35 per cent of the order book. These contracts tend to be executed over several years. The engineering, procurement and construction (EPC) order book is about 2x of the revenue. Most of VA Tech Wabag’s projects are funded by central government agencies such as Namami Gange Mission, Atal Mission for Rejuvenation and Urban Transformation and multilateral agencies, reducing any customer default risk. During FY18-FY22, the company’s liquidated damages averaged only 0.2 per cent of its revenue, Ind-Ra said.