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Due to the recent correction in Va Tech Wabag's shares (around 15% in the last one month) and healthy orderbook, domestic brokerage and research firm ICICI Securities has upgraded VA Tech's rating to Buy from Add with a revised target price of 337 apiece.

In the FY23 Budget, there is an increased allocation of Rs600bn towards Jal Jeewan Mission. The Namami Gange phase-2 is expected to be tendered out soon. Additionally, as ESG regulations tighten and demand for water-related projects increases, industrial order inflow is expected to pick pace, highlighted the brokerage. 

“The company has developed a strong niche in the water treatment segment for industrial and government funded schemes, in the domestic and international markets, where order pipeline continues to be strong. Hence, on continuing healthy order intake prospects and benign valuations, we upgrade the stock to Buy," the note stated.

VA Tech Wabag’s (VA Tech) revenues declined 10.7% YoY due to 10% year-on-year decline in EPC revenues in Q4FY22. Gross margin expanded, however, higher overhead costs limited EBITDA margin expansion. 

EBITDA and APAT declined also, though, order intake was strong at 8 bn/ 36 bn during Q4FY22/FY22. This led to a robust orderbook of 101 bn, 65% of which is for EPC contracts. The company has provisioned 600 mn towards pending receivables from gencos. Meanwhile, chennai 400MLD desalination bids are close to completion and expected to awarded in FY23.

The management is focusing on bidding for more engineering and equipment supply orders and for multilaterally-funded international projects, to support margin and cashflow growth, ICICI Securities added.

As per the latest shareholding pattern on the BSE, Indian ace investor and stock market trader Rakesh Jhunjhunwala's wife Rekha Jhunjhunwala holds 8.04% stake in the water treatment company as of March 31, 2022.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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