Nomura sees more than 50% upside on this Rakesh Jhunjhunwala portfolio stock

Nomura in a result note on Va Tech Wabag said that the company’s Q1FY22 was largely on expected lines. Its sales and EBITDA margin were in line due to commodity costs and extended stay at projects sites due to outbreak of second wave of COVID-19. The management of the highlighted that excluding the impact of the COVID-19 second wave, revenues would have been 10-15% higher and EBITDA margins by 150 bps, it said.

The management further highlighted that the government’s thrust on flagship missions such as Jal Jeevan, AMRUT and Namame Gange continues, and further big-ticket desalination projects like Chennai desalination are also in the prospect pipeline. The higher-margin industrial segment has also been revived, with strong prospects in oil & gas.

Nomura has maintained its ‘Buy’ rating on the Va Tech Wabag stock with target price of ₹546 per share, more than 50% implied upside. The brokerage firm said that the order prospects are robust and focus on industrial orders could improve EBITDA (earnings before interest, taxes, depreciation, and amortization) margins. Though, it said that key risks include slowing domestic capex for water and a sharp rise in commodity costs.

As per the BSE shareholding pattern, Rakesh Jhunjhunwala holds 8.04% stake or 50,00,000 shares of the company as of June 2021 quarter. Jhunjhunwala is a qualified Chartered Accountant, manages the asset firm Rare Enterprises and invests in both his own name and his wife’s, Rekha Jhunjhunwala.

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