Rajiv Mittal, MD & S Varadarajan, ED add the call.Highlights by Capital Mkt
For the quarter ended June 2015, Va Tech Wabag reported a 14% rise its consolidated sales to Rs 456.62 crore. OPM crashed from 6.2% to 2.6% which pulled OP down 51% to Rs 12.07 crore.Interest cost grew 23% to Rs 7.17 crore and depreciation jumped 53% to Rs 5.11 crore. Thus loss at PBT level stood at Rs 21 lakh against a profit of Rs 15.64 crore.Depreciation for June 2014 quarter includes a reversal of Rs 2.76 crore which represents the impact of change in accounting policy from WDV method to SLM method.Provision for taxation jumped 103% to Rs 9.70 crore, after which loss at PAT stood at Rs 9.91 crore against a profit of Rs 10.87 crore.Minority interest and share of profit/loss of associate companies stood at Rs 3 lakh against loss of Rs 70 lakh.
Finally loss at consolidated net profit level stood at Rs 9.88 crore against a profit of Rs 10.17 crore.
During the quarter Indian business contributed 45% of the total revenue. Revenue grew 121% to Rs 209.49 crore. PBIT grew 103% to Rs 62.84 crore and accounted for 45% of total.During the quarter Rest of the World business accounted for 55% of the total revenue. Revenue fell 20% to Rs 258.11 crore. PBIT stayed at Rs 75.83 crore almost same as last year’s and accounted for 55% of total.The management is delighted that right at the beginning of the year the company has won good orders of over Rs 1000 crore. All the orders secured are from International geographies which would be serviced by Indian manpower contributing to increased margins.It has order book of Rs 7631 crore including framework contracts of Rs 1542 crore.The management is happy to have begun the year well. Happy with the order intake.On consolidated basis the company had provision of about Rs 5 crore towards LD as a conservative and prudent accounting practice and increased cost due to extended stay at site of Rs 5 crore in the Oman Desal Project led to lower EBITDA margin.Increase in total cost of operations (TCO) is mainly due to increase in site employee cost for Istanbul O&M Project in Turkey and accompanied by increase in other expenses commensurate with growth.The company saw increase in Interest charges and depreciation largely on account of Ujams BOOT Project in Namibia.In FY 2016 the management has guided that Revenue will be in the range of Rs 2800-3000 crore & order intake will be in the range of Rs 3500-3700 crore.On standalone basis good opening backlog and increased focus on project execution has resulted in growth of sales and EBITDA.On standalone basis, negative depreciation in the previous year was due to change in methodology of depreciation from WDV to SLM and adopting the revised depreciation rates as prescribed under Companies Act 2013.
Some projects in MENA region are getting delayed and some are getting downsized.The government is very keen to clean the Ganga. In last quarter money was also allocated for the same. The government is very serious about cleaning Ganga project.Next quarter the management sees that pilot projects may come out for tendering.On standalone basis OPM improved due to higher execution of projects.
Al burba project had Rs 60 crore in June 2014 quarter while it was nil in June 2015 quarter as the project is almost finished. This coupled with depreciation of Euro of 15% from last year June quarter to this year June caused fall in international revenues. However the management is confident of meeting the annual guidance.Gross cash as on June 2015 is 370.50 crore.The company does not foresee any substantial increase in employee cost.Total debt is Rs 230 crore.The company has just bid for a very large project in Philippines.Cash generation is deteriorating in Indian business. However this will change in the current quarter.The company won Rs 580 crores STP order in Bahrain. The Sewage Treatment Plant order for Al Madina Al Shamaliya, the new town being developed in Bahrain, is funded by Abu Dhabi Fund for Development. WABAG will Design & Build the 40 MLD Al Madina Al Shamaliya Sewage Treatment Plant for Ministry of Housing, Bahrain.
Rajiv Mittal, MD & S Varadarajan, ED add the call.Highlights by Capital Mkt
Rajiv Mittal, MD & S Varadarajan, ED addr the call.Highlights by Capital Mkt
For the quarter ended September 2015, Va Tech Wabag reported a 19% rise its consolidated sales to Rs 602.46 crore. OPM crashed from 6.8% to 7.7% which pulled OP up 34% to Rs 46.50 crore.PBT grew 33% to Rs 30.33 crore and net profit fell 6% to Rs 14.63 crore.For six months ended September 2015, Va Tech Wabag reported a 17% rise its consolidated sales to Rs 1058.97 crore. OPM fell from 6.5% to 5.5% which pulled OP down 1% to Rs 58.57 crore.PBT fell 22% to Rs 30.12 crore and net profit dived 82% to Rs 4.75 crore.
The company’s strategy to grow in diversified grographies has enabled it to deliver consistent order intake notwithstanding the muted progress in the Indian market.Order intake stood at over R. 3080.40 crore.Order Book stood at Rs 8617.70 crore & Framework Contracts of Rs 1540 crore.Thanks to its healthy order backlog it was able to fast track execution in India market amidst tight liquidity situation in the market by supporting sub-contractors and suppliers.
The company has total order backlog of Rs 8600 crore including Framework Contracts of Rs 1500 crore. Order backlog provides visibility for 3 years.
Good opening backlog and increased focus on project execution has resulted in growth of sales and EBITDA.The company incurred increased cost of sales to extent of Rs 5 crore due to extended stay at site in the Oman desal project and in general mix of projects for the quarter.
The company has classified the site employee cost for Istanbul O&M Project in Turkey under Cost of Sales in September 2015 quarter and accordingly aligned the numbers of prior period.
Overall, overheads in general were tightly controlled
Euro depreciation of 12%, delay in Nepal project due to local conditions, Oman project nearing completion, many overseas projects being under engineering completion contributed to drop in overseas revenue in September 2015 quarter.Cost of sales vary from quarter to quarter depending on the mix of projects.Tight control of overheads has led to reduction in TCO and higher EBIDTA.There was also reduction in provision for receivables.Interest cost grew 76% to Rs 10.87 crore. Increase in finance cost was largely due to increase in Interest charges on account of Ujams BOOT Project in Namibia (was IDC during prior period) and reduction in interest income.
The management feels that Africa and South East Asia are largely untapped- emerging economies and the company can have competitive edge through Indian support.In Middle East the company has >50% of Desal market in Saudi. This market has high potential for advanced technologies.In Europe, the company has over 100 patents in its R&D Centre. Its setup in Europe acts as references for global business.
Exchange rate for balance sheet used for Sep 15 of 74.45 had 10% increase over FY Mar 15 of 67.93 rate.Current liabilities grew 10% to Rs 1486.5 crore due to increase in short term borrowings for working capital.The company took 6 Projects to completion during the first half.
The company now has a separate team for project closure which leads to focused attention on closing projects.The company resorted to use its cash in Balance Sheet for Speedier execution as sub-contractors and vendors face tight liquidity market situation.
One of the key orders received in September 2015 quarter was order from Petronas RAPID ETP, Malaysia worth Rs 1534.50 crore. This is the biggest ever order secured by the company. This gives immense confidence to the company as it secured the order in competition with established foreign players. This order proves the company’s technology superiority in providing large complex projects in overseas. 70% of this order book is with the company and the rest is with the JV partner.During the quarter the company also won new orders in the O&M space and advanced technology order in Switzerland for a modern biological membrane.Organization realignment is aimed to gear up its human capital towards achieving its target of becoming 1 billion Euro group.Networking capital excluding cash stood at 59 days of sales.Government is working fast towards its commitment of smart cities, Swach Bharat and Namami Ganga. In coming years, the company expects strong orders from the Indian geography.
Guidance range for FY 16 revenue is Rs 2800 crore – Rs 3000 crore & Order Intake guidance range is Rs 3500 crore - Rs 3700 crore
Good Q3 results on stand alone basis. Not so great for consolidated numbers. for 9 months ending Dec 15, Standalone Sales and EBITDA are up by 46% and 51% respectively. 9 months consolidated sales and EBITDA are up 11% and 7% respectively.Order book Rs 7950 Crores. Conference call on Monday 8th Feb at 4pm
CONFERENCE CALL - from Capital Markets
Va Tech Wabag
Confident that the realignment exercise which it had carried out across the group recently will bring out the best among the various geographies and teams
Va Tech Wabag held Conference call on 8th February 2016 after it declared results for the quarter ended December 2015.
Rajiv Mittal, Managing Director and S Varadarajan, Executive Director addressed the call.
Highlights of the call:
For the quarter ended December 2015, Va Tech Wabag reported a 12% rise its consolidated sales to Rs 630.77 crore. OPM improved 70 basis points to 7.1% which pulled OP up 16% to Rs 44.77 crore. PBT grew 9% to Rs 29.64 crore. Net profit grew 37% to Rs 18.90 crore.
For nine months ended December 2015, Va Tech Wabag reported a 11% rise its consolidated sales to Rs 1689.74 crore. OPM fell from 6.4% to 6.1% which pulled OP up 5% to Rs 103.34 crore. PBT fell 9% to Rs 59.76 crore. Net profit dived 40% to Rs 23.65 crore.
In the consolidated results, personnel cost directly attributable to operations and maintenance contracts have been classified as cost of materials consumed as they represent directly attributable project cost. Consequently Rs 45.21 crore for the nine months and Rs 28.44 crore for the quarter and Rs 77.02 crore for the FY 2015 have been reclassified to conform to the figures presented during the period.
During the quarter Indian business contributed 38% of the total revenue. Revenue grew 17% to Rs 253.10 crore. PBIT jumped 119% to Rs 53.71 crore and accounted for 39% of total
During the quarter Rest of the World business accounted for 62% of the total revenue. Revenue fell 1% to Rs 415.92 crore. PBIT grew 4% to Rs 85.33 crore and accounted for 61% of total
During the nine months Indian business contributed 39% of the total revenue. Revenue grew 44% to Rs 675.50 crore. PBIT rose 58% to Rs 141.73 crore and accounted for 40% of total
During the nine months Rest of the World business accounted for 61% of the total revenue. Revenue fell 3% to Rs 1078.96 crore. PBIT fell 6% to Rs 215.13 crore and accounted for 60% of total
Total Order Book stood at Rs 7950 crore
The company has delivered excellent Standalone results and the management is confident that the realignment exercise which it had carried out across the group recently will bring out the best among the various geographies and teams.
The synergy created will help to strengthen the company’s presence across regions and deliver execution excellence.
The orders secured during this year are a testament to the focus of the company on securing big ticket orders globally.
During the quarter, WABAG Turkey bagged a Euro 20.75 Million order from the Turkish Ministry of Environment and Urbanization. The order is co-financed by the European Union. WABAG Turkey will design and build a new municipal wastewater treatment plant with a design capacity of roughly 145,000 m3/d. This will be one of the most modern plant design with a combination of mechanical/biological wastewater treatment based on the activated sludge process and consequent sludge treatment with anaerobic stabilization and solar sludge drying.
This order, after Siverek and Polatli WWTPs, is the third from the client – the Turkish Ministry of Environment and Urbanization – and strengthens WABAG’s excellent market position in Turkey.
In Latin America, the company sees huge market for Desal, Industrial and BOOT Projects.
South East Asia is Largely untapped - Emerging economy and the company has competitiveness in the region through Indian support
In India the company enjoys high margins as it has low cost of operations
The African market is largely untapped- emerging economy. In African markets also the company enjoys competitiveness through Indian support.
Good opening backlog and increased focus on project execution has resulted in growth of sales.
Cost of Sales vary quarter on quarter depending on the mix of projects.
Increase in Other Expenses is mainly due to Increase in Provisions for receivable as per company policy
Increase in Finance Charges is due to reduction of interest income and increase in Interest expense.
Euro depreciation of 11%, delay in Nepal project due to local conditions, Oman project nearing completion, many overseas projects being under engineering completion contributed to drop in overseas revenue in December 2015 quarter.
Increase in Contribution Margin in Overseas is due to O&M projects in Bahrain & Singapore and due to provisioning in prior period in the Oman Project.
Increase in Net Finance cost is majorly due to Interest charges on account of Ujams BOOT Project in Namibia. This was IDC during prior period.
During the nine months O&M business accounted for 23% while 77% came in from EPC business.
Municipal business accounted for 56% while 44% came in from Industrial business.
India accounted for 56% of total sales during the nine months. 34% came from Europe Multi Domestic Units (MDUs) and 10% came from India International Units (IIUs).
43% of the order intake is from municipal business and 57% is from industrial.
India accounts for 40% of total order intake. 42% came from IIUs and 18% came from Europe MDUs.
Total order book was Rs 7952.4 crore.
Wabag India had order book of Rs 3305.7 crore. Wabag Overseas had order book of Rs 3104.7 crore. Framework Contracts were Rs 1542.0 crore.
The management gave guidance range of Rs 2800 crore to Rs 3000 crore for FY 16. Order book guidance range is Rs 3500 crore to Rs 3700 crore.
Chennai was battered with heavy rain and floods for two months
Recent months saw very positive decision by the GoI, namely namami gange and smart cities.
Smart cities should have adequate water supply and sanitation. This presents huge opportunities for the company.
For Namami Ganga the government has allocated Rs 25000 crore. This has been allocated for municipal waste water and industrial waste water entering Ganga.
Working Capital without cash was at 54 days.
The company has order book for one and a half years. Thus it will be choosy in future but they will not let good order go away.
Gross cash balance of 380 crore. Consolidated Debt is Rs 348 crore. Net cash is Rs 32 crore.
Standalone Debtors stands at Rs 980 crore
Consolidated Debtors stands at Rs 1500 crore.
The company always tries to get orders in the currency in which it will spend money to complete the order.
The company is expecting that the India cluster will account for 50-55% of future order book, 20%from Middle East and Africa cluster, Another 20% from Europe and 10-15% from Latin America.
Average execution period of the order book is 2.5 to 3 years.
Consolidated gross interest cost for quarter is Rs 7 crore. Finance charge is Rs 4 crore and net income of Rs 1 crore.
CONFERENCE CALL - from Capital Markets
For FY 2017, the company expects revenue in the range of Rs 3000 crore – 3200 crore and Order Intake of Rs 4000 crore – Rs 4200 crore
Va Tech Wabag held its conference call on 27th May 2016 to discuss its results for the period ended March 2016.
Rajiv Mittal, Managing Director and S Varadarajan, Executive Director addressed the call.
Highlights of the call:
For the quarter ended March 2016, Va Tech Wabag reported a 5% drop its consolidated sales to Rs 858.83 crore. OPM improved 180 basis points to 14.1% which pulled OP up 9% to Rs 121.31 crore. Net profit fell 3% to Rs 68.54 crore.
For FY 2016, Va Tech Wabag reported a 5% rise its consolidated sales to Rs 2548.57 crore. OPM fell from 8.6% to 8.8% which pulled OP up 7% to Rs 224.65 crore. Net profit dived 16% to Rs 92.19 crore.
During the quarter Indian business contributed 32% of the total revenue. Revenue fell 34% to Rs 289.10 crore. PBIT fell 26% to Rs 52.07 crore and accounted for 27% of total
During FY 2016 Indian business contributed 36% of the total revenue. Revenue grew 6% to Rs 964.60 crore. PBIT rose 21% to Rs 193.80 crore and accounted for 35% of total
During FY 2016 Rest of the World business accounted for 64% of the total revenue. Revenue grew 5% to Rs 1703.83 crore. PBIT stagnated at Rs 359.34 crore (against Rs 358.51 crore) and accounted for 65% of total
The company saw highest ever over intake of Rs 5000 crore of orders secured in FY 15-16 despite challenging conditions.
Major orders were received includes Polgahawela Water Treatment order in Sri Lanka (Rs 734 crore), Tertlary Treatment Plantorder from Chennai (Rs 594 crore). The company also secured an order from Petronas RAPID ETP, Malaysia (Rs 1540.7 crore), Al Madina Al Shamaliya (AMAS), Sewage Treatment Plant (STP) order Bahrain (Rs 587.60 crore) and Rs 223 crore order from Dangote RWTP, Nigeria.
The Sri Lankan order will start in Q2.
Petronas RAPID ETP, Malaysia is a 3-year order. The Re-FEED engineering approval has been achieved and the procurement activities have already started for this project. The construction activities too at the site have begun.
For AMAS project the basic engineering has been approved by the client. In this project, the civil works have started and the ordering of key equipments is at an advanced stage.
The Rs 220 crore RWTP order from Dangote Fertilizers in Nigeria is at an advanced stage of engineering and the ordering of supplies is progressing at a good pace…
Order from Chennai Metropolitan Water Supply and Sewerage Board (CMWSSB) is for Construction and Operation & Maintenance (O&M) of a 45 MLD Water Reclamation Plant at Koyambedu, Chennai.
Total Order Book stands at Rs 8320 crore including Framework Contracts of Rs 1000 crore.
In Europe, the company has its own R&D Centre and it has filed over 100 patents.
Africa is a largely untapped- emerging economy. Va Tech Wabag enjoys competitiveness through Indian support.
LATAM is a huge market for Desal, Industrial and BOOT Projects.
50% of Desal market is in Saudi. Middle East is a high potential market for advanced technologies. The company enjoys competitiveness through Indian support.
India is a high margin and low cost of operations business.
In India the company has technology centre for Industrial business and desalination.
South East Asia is a largely untapped emerging economy.
The dependence on Q4 sales has been reduced with sales being spread across the quarters.
The company had 140 basis points increase in EBITDA margin in Q4 FY16 due to high margin IIU projects.
Increase in finance charges was due to reduction in interest income and increase in interest expense for working capital borrowings.
Euro depreciation of 7% and delay in engineering approvals in few projects under Europe cluster contributed to drop in revenue in the overseas projects.
Increase in Interest cost from Ujams Boot project was about Rs 2.6 crore. This contributed to increase in Finance cost in FY 16. In FY 2015 major part of this project was under ICD.
Negative depreciation in March 2015 quarter was due to change in methodology of depreciation from WDV to SLM apart from aligning life of assets globally in line with Companies Act 2013.
Higher profitability in standalone entity contributed to increase in tax in the group impacting the group PAT.
Consolidated noncurrent liabilities fell from Rs 311.6 crore to Rs 222.5 crore in FY 2016. Reduction in Non-current liabilities is due to 28% NAD devaluation of Long Term borrowings pertaining to Ujams BOOT Project and reduction in Customer Advances in India.
The company resorted to use its cash & borrowings in Balance Sheet for speedier execution as sub-contractors and vendors face tight liquidity market situation.
Share of Industrial order was significant. These orders have higher portion of engineering and service which is company’s forte and should result in higher margins.
Indias, Nepal, Bangaladesh and Sri lanka and also in Europe and Latin America offer good market.
In FY 2017 the company has already secured order worth Rs 500 crore. the order secured are from Nepal for ADB funded waste water treatment plant, an industrial desalinization plant for Reliance Industries in India and Industrial water treatment plant by the company’s Czech subsidiary.
Despite tough global macro-economic conditions, the company has delivered good results.
The liquidity stress in the market impacted its bottom line.
Productive approach to focus on international market on key big ticket job helped the company in garnering order book of Rs 5000 crore.
With the healthy order book the company sees a good outlook for the coming year.
Net working capital number of days sales is 96 days.
For FY 2017, the company expects revenue in the range of Rs 3000 crore – 3200 crore and Order Intake of Rs 4000 crore – Rs 4200 crore.
Short term borrowings grew from Rs 104.8 crore to Rs 327.2 crore in FY 2016 due to increase in the working capital.
Other Current Liabilities grew from Rs 104.8 crore to Rs 327.2 crore in FY 2016 due to increase in advance from customers in AMAS project in Bahrain.
Without a doubt the margins should increase in FY 2017.
Due to flood in Chennai desalinization has stopped as there is enough water for few months. So for the company this is a temporary phenomenon.
Few overseas orders which got delayed due to engineering closure issues will see it coming in Q1 and Q2 of FY 2017.
Highlights of Concall:
Consolidated Sales grew 27%. Consolidated Net PAT stood at Rs 5.2 crore against a loss of Rs 9.8 crore.
The company had Order intake of more than Rs 800 crore. Order Book stands at over Rs 8320 crore including Framework contracts of about Rs 870 crore. In a tough macro environment the company is sitting on a comfortable order book. The execution is on track in all the key projects.
WABAG India won an Asian Development Bank funded Wastewater Treatment Plant order worth Rs. 140 crore in Nepal. This was the second order it won in Nepal.
WABAG Czech Republic bagged a US$ 19 mn Industrial Water Treatment Plant order for a new Power station in Vietnam.
It bagged a 24 MLD Desalination plant order from Reliance Industries for a value of Rs. 108 crore.
Higher Order Intake in March 2016 quarter and June 2016 quarter and Increase in Short Term Borrowings for Working Capital resulted in increased Finance Charges and Interest Expense.
Export sales grew 59% to Rs 408.61 crore due to expediting of Sales in Overseas entities.
Revenue guidance for FY 17 is in the range of Rs 3000 crore – Rs 3200 crore.
Order guidance is in the range of Rs 4000 crore – Rs 4200 crore.
The company sees good traction in Maharashtra (Mumbai alone have projects pending for worth of Rs 8000 crore), Delhi (Rs 2-3000 crore), Rajasthan, Karnataka (Rs 2-3000 crore) and Tamil Nadu (Rs 5000 crore). All approvals have gone through. Tendering process should start soon and the company is confident that in FY 2017 these projects will be awarded. The company hopes to bag big orders from these states.
It hopes to have breakthrough in the Latin America cluster.
In Turkey no project was affected due to coup.
Situation of receivables will continue improving in the coming quarters.
Short term borrowing in India is Rs 225 crore. Cash balance is Rs 78 crore.
Receivables in India have come down compared March levels. Receivable days have fallen by 10%.
Some Indian orders the company had got towards March 2016. These orderes had substantial amount of engineering before it started getting revenues. Thus it has not been able to get revenues. But this will substantial improve revenue in its Indian business.
In consolidated business it was not able to achieve revenue due to engineering delays. But will get in coming quarters.
Going forwards share of low contribution margin orders is coming down. Going forwards margins should improve. APGENCO, the order with low margins will end in FY 2017.
In EPC business unless the company gets advance and LC it does not take it into orders or start the work.
Creditor outstanding during the quarter was close to Rs 600 crore in standalone and Rs 1000 crore in consolidated entity.
This quarter results look really good…
Its not yet a mouth-watering business
- 40% debt.
- -ve & volatile free cash flow.
- low ~10% ROE.
- Will the biz require high capex to invest in & win BOOT projects?
It can become interesting if it transforms into a pure water IP/tech company with better fundamentals (like microsoft or oracle)
it was an interesting company as such having concentrated on pure tech part and being an asset light business. Also good part of business coming in from Operation/Maintenance Contract.
however, it has moved to this stage in last 2 years by involving into capex for one or two big plants and also with delayed payment from many projects due to recession/low demand period.
that was the juncture about 2 years back when i moved out of this stock.
There seems to be a lot of pressure on Wabag today. Although there is expectation of a 43% dip in sales this quarter but the results are not yet out afaik. PAT drop expected at 89% qoq.
Any other developments?
The stock has lost 1 years gain in 1 day.
Wabag came out with the decent numbers this quarter. Last year was quite a difficult year for the company. This year they are showing stable improvement. International market contribution to revenue is increasing meaningfully. Unfortunately, this stock has not given good returns for past couple of years which can be attributed to uneven business performance in spite of being in a sector which has a huge potential. But it surely testing the patience of investors :)…Would appreciate the thoughts of other boarders on this stock
I have been tracking this stock for some time. There is not much order intake in last 3 quarters. Company has been talking about projects from Namami Gange program. But nothing came until now. Also there is heavy competition in international business.
Equity Intelligence acquired 5% of the company
Interesting read on Wabag:
Overall I believe this story will play out but its hard to say how long it will take, could be a couple of years or could be more than 5 years as well.
Dis - I am invested at current levels
Please find below cumulative net profits and cash flow from operation of the company. The difference is huge & need deep analysis.
Cash is reality. Stay away from such stocks. If you are planning to allocate, keep the size less than 5% of your overall portfolio.
If you compare the cumulative operating cash flows and cumulative net profits over the past 10 years, there is a big divergence
cPAT = 650
cCFO = 131
why the company is unable to convert profits into cash? —> Big red flag
I am not sure you can just isolate these alone and see, cPAT for last 10 years is 721 cr , and cCFO is negative 108cr Capex 250cr , cash + investment 280cr ,dividend paid is 88cr
all these are consolidated numbers, I havent studied the company in depth so not sure if the difference between cPAT and cCFO can alone be seen as a red flag