ICICI Securities: VA Tech Wabag Q1 Review - Uphill Task Ahead; Dilution At Discount Valuation
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ICICI Securities Report
VA Tech Wabag Ltd. has taken 13.7% dilution, valuing the company at a market cap of Rs 8.7 billion, which we believe is at a substantial discount.
The company was rather compelled to take this step given the cashflow stress and liquidity requirement to resume large orders like Namami Ganga etc.
Strong orderbook of Rs 111 billion (4.4 times trailing twelve months sales) lends visibility; however, 30% of orderbook is operation and maintenance which restricts near-to medium-term growth.
Balance sheet stress continues to drag the overall liquidity and we believe this may lead to more fund raising.
Hence, the company has come out with a proposal to further raise Rs 2.8 billion.
Factoring in the commencement of Namami Ganga and gradual easing out of the lockdown, we raise earnings by 21.5% and 39% for FY21E and FY22E, respectively.
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