Given the large opportunity ahead and inherent strengths of VTW like professional management, niche technical expertise and global presence, the company will be one of the preferred investment opportunities in the water segment. We expect the earnings to grow by 23% (CAGR) during FY2014-17, backed by an 18% revenue growth and inch up in margins with increasing share of O&M business and cost rationalisation efforts by the management in international operations (subsidiaries). The company is poised to generate RoCE and RoE in the range of 22-25% and 16-17% respectively in the coming few years and with healthy cash generation from operations, the net cash is likely to remain positive. We initiate our coverage with a Buy recommendation on VTW and set a price target of Rs1,900 (based on 25x FY2017E earnings) for the stock.
I don’t think it’s right time to buy now, it might stay in correction for long time.