Va Tech Wabag

(kartiks) #62

MNC Stock

MCap 1895 Cr
Revenue FY18 3457 Cr
PAT 117 Cr

CMP 345
BV 206
EPS 21

ROCE Avg 10Y 21% [ as per ]

Div Yield 1%

(himanjim) #63

My study of annual report:

  1. Balances with government authorities jump to Rs. 117 crores from Rs. 70 crores,(we might consider this +ve since this means they are getting more govt. projects)

  2. Share of (losses) from joint venture 59 crores in 2017, NIL in 2018 (+ve)

  3. Maximum revenue & profit is from outside India, which means a lot of scope remaining in India(+ve or -ve can’t say)

  4. Working capital changes, actually the trade receivables eating into the cash from operating profits (every year same story)(-ve)

Can somebody explain “Bad and doubtful debts, net” of Rs. 57 crores?

(himanjim) #64

  1. ‘Negative’ rating outlook reflects the increased working capital intensity and the moderation in the liquidity profile of the company following an increase in the receivables (including the retention money) pending with clients specifically, the APGENCO projects which have increased significantly in the recent past.

  2. the various provisions made towards bad debts, liquidated damages, warranties & contract losses have thus restricted the consolidated operating margin over the years.

  3. With high working capital requirements in domestic business, execution of lowmargin orders like APGENCO & weak profitability in overseas subsidiaries, RoCE on overall basis has contracted from 23% in FY2014 to 19% in FY2018.

  4. working capital has been funded mostly through supplier credit and hence the overall outside liabilities continues to remain high relative to the net worth position.

Highly working capital intensive firm.

(FindromInvestments) #65

Point No.3, surely positive!
The govt did come up with a water index, this shows awareness.

As and when that index starts showing unfavorable signs, Indian projects will pick up pace as the govt might answer the wake-up call.

(ranjitsasidharan) #66

Wabag is now available at close to 10 PE.
It hardly has any debt (net), and borrows mainly for working capital requirements. This increased interest costs/bank charges by 10% or 5 Cr. That is not a big deal considering a EBITDA of close to 300 Cr.

Is the receivables problem such a big deal as it’s made out to be? As per AR, it’s non current receivables is around 420 Cr. I’m assuming a significant portion of this is related to APGENCO.
The current receivables increase every year as the company grows and seems to a general industry trend. So, that, to me seems a non issue.

I feel that as the money from APGENCO starts flowing in, the cash position will improve substantially. The 2 power stations are running fine, so there seems no concerns around getting the money.

Therefore, I’m perplexed by the relentless selling of this co.

Disc: invested, ~10% of PF, holding with heavy loss. Thinking of averaging at current levels.

(asarun) #67

Yes, I have been surprised by the relentless sell-off, and heavily in loss too. The working capital issue is one, their receivables has also been rising continually. I have also not seen any new contract announcements in a while. With the rupee fall, it should have actually worked a bit in their favour I thought. Maybe there is some other underlying issue? So long as it’s not something governance related, I think it will recover.

(lastgenesis) #68

Lack of fresh orders is worrying as is delay in most things management has claimed. APGenco should have been resolved by now and since 12 months management has been promising orders coming in next quarter or so. They seem to be L1 in stuff but things not getting closed. The macro potential is immense, management does not seem to be able to convert it at the moment :frowning:

DIsc: invested