Hem Securities’ ace stock pickers, Vineeta Mahnot & Astha Jain, have mastered the art of picking winning stocks if one goes by their recent stock picks Vaibhav Global (recommended in August 2013 at Rs. 176, CMP Rs. 698, gains 295%), Suven Life Science (recommended in October 2013 at Rs. 46, CMP Rs. 75, gains 63%), Tata Elxsi (recommended in November 2013 at Rs. 253, CMP Rs. 586, gains 131%) and Fiem Industries (recommended in December 2013 at Rs. 337, CMP Rs. 386, gains 14%).
So, it is no surprise that we are all ears when Vineeta Mahnot announced Va-Tech Wabag as her latest stock pick. Let’s quickly take note of her brilliant analysis on why Va-Tech Wabag is a compelling buy:
– VA Tech Wabag is Indian multinational player technology focused company which provides a complete range of water and waste water treatment solutions.
– The company has registered robust results for the quarter ending December 2013. The consolidated revenue has increased by about 66% at Rs 589.30 crore for quarter under review as compared to Rs.354 crore for the quarter ended December 31, 2012. The company’s business managed and operated out of India has contributed to the stellar performance. Operating profit climbed sharply by ~84% at about Rs.40.99 crores as against Rs.22.30 crores in the previous year quarter. The net profit of the company skyrocketed by about 116% at Rs. 21.71 crores as compared to Rs 10.04 crore for the same quarter in the previous year. The company’s Multi Domestic Unit strategy is paying off well.
– Revenue from international business for the quarter is at Rs. 358.96 crore against Rs. 177.29 crore, a rise of 102.47% y-o-y. Domestic revenue for the quarter stood at Rs. 239.02 crore against Rs.176.35 crore, a jump of 35.54% y-o-y.
– Order inflow for 9MFY14 stood at Rs.3047.5 crores comprising domestic orders worth Rs.1844 cr and Rs.1203.5 cr overseas. The inflow includes EPC orders worth Rs. 2621.3 cr comprising 86% of the order inflow while O&M orders stood at Rs.426.2 cr representing the remaining 14%. Municipal order inflow was at Rs.2233 cr while Industrial orders were at Rs. 814.50 cr.
With asset light model, robust order pipeline, strong balance sheet, leadership position in Indian market and increasing geographical presence with strong brand image; Va Tech Wabag Ltd. revenue visibility looks strong. Va Tech Wabag is trading at an attractive valuation at 16.86x and 14.24x of FY14EPS of Rs.41.01 and FY15EPS of Rs.48.53. We initiate a ‘BUY’ on the stock with a target price of Rs.870 (appreciation of about 26%) with the medium to long term investment horizon.