5 Key reasons why Motilal Oswal sees 40% upside in Va Tech Wabag stock

Synopsis: Motilal Oswal Financial Services Limited has given a Rs 1,900 Target on a Water treatment stock, which creates a potential upside of 41 percent from the current market price of the stock.

A well-known financial services firm in India, Motilal Oswal Financial Services Limited, has given a buy rating on a well-known water treatment stock with a target of Rs 1,900. This creates an upside potential of 41 percent for the stock from its current market price. The rationale stated includes a robust orderbook and a high book-to-bill ratio that supports its latest revenue guidance.

With a market cap of Rs 8,336 Cr, Va Tech Wabag Ltd is the stock in context, which hit an intraday high of Rs 1,34,9 which is 6.2 percent higher than the previous close of Rs 1270. The stock has given a compounded return of 57 percent in the past 3 years.

Brokerage Recommendation

Motilal Oswal Financial Service Limited has given a BUY ration on Va Tech Wabag Ltd with a target of Rs 1900. This represents a 41 percent upside potential from today’s intraday high of Rs 1349.

The rationals stated by the brokerage for its bullish views include  the following

1. Robust Orderbook: The company’s current orderbook stands at Rs 16,000 Crore, which is almost 5 times its FY25’s revenue. In the Rs 16,000 Crore, Rs 3500 Crore orders were received in H1FY26. These points clearly show growth visibility for the next 3-4 years. Apart from this, the company is also a preferred bidder in projects worth over Rs 3,000 Crore.

2. Bid-Pipeline: The company has a bid pipeline of Rs 15,000- 20,000 crore, out of which the company expects an annual order wins of Rs 6,000- 7,000 crore. The company has also been focused on bidding for high-margin EPC and O&M jobs, while the company also has a Rs 3,500 crore opportunity in the ultra-pure water segment.

3. High Book-to-Bill Ratio: With a Book-to-Bill Ratio of 5x, the financial matrix aligns with the management’s 15- 20 percent revenue CAGR guidance.

4. P&L statement Growth: In the latest quarter the company saw its revenue grow by 19 percent, while the adjusted EBITDA and PAT also grew by 17 percent and 20 percent, respectively. These were 2- 14 percent ahead of the brokerage estimates.

5. Better Margins: In Q2FY26, even though the EBITDA margin stood at 10.7 percent, the adjusted margin rose to 14.4 percent after the company accounted for its forex gains. Moreover, the brokerage also expects the EBITDA margin to trend towards 15 percent, which is at the higher end of the company’s guidance of 13-15 percent.

Apart from these points, Motilal Oswal Financial Service Limited also stated that the revenue growth was led by a 22 percent YoY growth in the EPC segment, along with a 6 percent YoY growth in Operations & Maintenance. While the revenue mix was 79 percent from Municipal space and 21 percent from Industrial.

The company also witnessed its International business (RoW) grow by 25 percent on YoY basis. Additionally, the company’s bad debt provisions have materially declined due to disciplined project selection, and as of now, the company’s cash position stood at Rs 560 Crore, which is Rs 670 crore if you exclude HAM projects.

Looking into the future, Motilal Oswal Financial Service Limited states that in FY25 – FY28, the company revenue CAGR is to be at 17 percent, while the CAGR for EBITDA and PAT will be at 22 percent and 23 percent, respectively.

Additionally, the brokerage also expects the company’s current ROCE to grow from 20 percent to more than 23 percent, and the ROE to grow to 16 percent from the current 14.6 percent in the coming 2 fiscal years. 

VA Tech Wabag Ltd is a global water technology leader and a pure-play Indian water multinational, providing end-to-end solutions across the water value chain. The company is engaged in the design, engineering, supply, construction, installation, commissioning and operation of drinking water, wastewater, industrial water and desalination projects for municipal and industrial clients. 

WABAG operates in 25-plus countries with over 1,600 water professionals and has executed more than 1,500 water and wastewater treatment plants worldwide, positioning it as a trusted lifecycle partner in sustainable water management.

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