VA Tech Wabag held its analyst meet.Rajiv Mittal, MD of the company addressed the meet.
Highlights of the meet by Capital Mkt;
VA Tech Wabag is a Complete Water Treatment Solution Provider.
It provides a complete range of Water and Waste Water Treatment solutions
Offering spans across Municipal Drinking Water, Municipal Sewage, Industrial Water, Industrial Effluents, Desalination and Recycle.
The company is a technology focused company.
It owns more than 100 patents.
The company has R&D centers located in India, Austria and Switzerland.
It is an Indian Multinational player in the water treatment industry.
The company has strong execution track record. It has executed more than 2250 projects in last 3 decades.
It is a professionally managed company with promoters having an average of 30 years work experience in the industry.
The company offers a complete range of solutions across project lifecycle. It is a pure play water company catering to both Municipal & Industrial customers. Its offerings spans across segments of water treatment.
Its domestic business can be divided into desalination, Municipal, Industrial and O&M.
The company has range of services from concept / design stage to implementation to operations of plant.
The company has Technical Know-howâAccess to over 100 Patents & Experienced Manpower.
It has Perennial Rights to “WABAG” brand since 1924.
Project References in more than 19 countries helps the company in project qualification.
The company’s international business comes from Sri Lanka, Indonesia, Qatar, Nepal, Tanzania and Bahrain.
It has Subsidiaries / JV in China, Oman, Philippines and Spain.
In Europe, the company is also present in Austria, Czech Republic, Switzerland, Romania and Turkey.
It has presence in Sub Saharan / North African Countries which are Tunisia, Libya, Iran, Namibia, Algeria and Macao.
It is also strongly present in Saudi Arabia, Egypt, Latin America.
The company has envious growth rate in India business. Revenue grew over 3 times From Rs 332 crore to Rs 1041 crore.
The company has strong opportunity to leverage low cost economic advantage in global market.
It has also seen smart rise in order intake. Order intake was Rs 1774 crore in FY 2012, which rose 19% to Rs 2155 crore in FY 2013.
The company has managed to reduce expenses in high cost geography by investing in high potential water markets by establishing local presence (MDUs). For example, total cost of operation in Wabag Austria Group was Euro 35 Mn in FY 2009, which fell to Euro 26 Mn in FY 2013.
The company has presence in High Growth Potential Water Markets like China, Italy, brazil Spain, Saudi Arabia, Mexico, South Africa, India, UAE
The company believes in asset light business model which it feels is critical for cost optimization.
Focus on âValue-Added & High Margin’ work processes Limits investment in asset base.
The company’s strengths are
Ability to handle large and complex projects
Execution skill for high value projects & in emerging geographies
Strong Balance Sheet
Asset light & Cash generating business
For the quarter ended December 2013 its consolidated sales grew 66% to Rs 589.30 crore.
The company’s asset light model results in low depreciation and finance cost. Thus any improvement in OPM directly flows through PBT. Thus a 66% growth in sales with 110 bps expansion in OPM powered the OP to grow 95% to Rs 44.34 crore. Interest cost, depreciation and Forex loss though stand higher, helped by lower tax incidence, the PAT more than doubled (up 120%) to Rs 21.66 crore. Eventually the net profit (after minority interest) was higher by 116% to Rs 21.71 crore.
Revenue from Indian Operations (excluding sales figures of Wabag India’s overseas order book) was up 36% to Rs 239.02 crore. But the non-Indian business (Rest of the World) was up 102% to Rs 358.96 crore with the revenue of Wabag Overseas (figures of overseas subsidiaries excluding revenue out of Wabag standalone overseas order book) was up 140% to Rs 308.93 crore but that of ROW (out of Wabag India’s order book) was up just 3% to Rs 50.03 crore with lower contribution from Dambulla (SriLanka) project.
For the nine months consolidated sales were higher by 44% to Rs 1340.94 crore and with 80 bps expansion in OPM the operating profit was up by 61% to Rs 101.70 crore. Eventually the net profit (after MI) was higher by 40% to Rs 41.96 crore.
The company’s strong positioning has resulted in consistent order intake across geographies.
It has converted threat into opportunity as it has successfully seen robust order intake growth in overseas business.
As on December 2013, it had added Rs 398 crore of Framework Contracts of which Rs 244 crore moved to firm Order Book in Jan 14.
The company has also seen 70% increase in ticket size since FY 2012. The ticket size was Rs 108 crore in FY 2012, which rose to Rs 136 crore in FY 2013. During the nine month period ending December 2013 it stood at Rs 183 crore.
The company’s current order book is of Rs 6000 crore.
EPC âMunicipal segment account for the bulk (58%) of the order book, which in value terms stands at Rs 3486 crore.
O&M accounts for 27% of the order book (or Rs 1611 crore) and Industrial orders account for 15% or Rs 901 crore.
Average execution period for Municipal Orders is 24 months & Industrial orders is 12 to 15 months.
Framework Contract standa at Rs 1,169 crore of which Rs 244 crore moved to firm Order Book in Jan 14.
The company has well diversified geographical presence which reduces dependence on single country.
The company enjoys strong ability to convert order book in to revenue despite temporary geographical set back and other economic issues.
The company is gaining margin on account of better absorption of overhead.
The company’s Multi Domestic Unit (MDU) strategy is paying off. International business managed and operated out of India has started to contribute to the stellar performance. Going forward the management’s aim is to further improve the margins in international business. The management is confident that with a robust order book backed by funded projects and with strong inherent execution capability, it will have a rewarding FY2013-14.
Order intake for the Q3FY14 was up 70% to Rs 1014 crore and for nine months was up 108% to Rs 3048 crore. Consolidated order backlog of the company as end of Dec 2013 was Rs 7167 crore (up from Rs 6122 crore as end of June 2013). The order backlog is including framework contracts of Rs 1169 crore.
Nine month order intake in FY14 surpasses full year order Intake of each of last 3 FY.
The company raised its sales and order intake guidance.
The company had given order intake guidance in the range of Rs 2600 crore and Rs 2700 crore for FY 2014. Revenue guidance was in the range of Rs 1850 crore and Rs 1950 crore for FY 2014.
It has raised revenue guidance to Rs 2,000 crore and Order Intake guidance to Rs. 3,500 crore for FY 2014.
Receivables & payables are higher on balance sheet date because Q4 generally accounts for 40-45% of annual turnover. Moreover, invoice raised & recognized as revenue that appear in receivables, are not due for payment as per contract. This applies to payables to major vendors also. The company receives and makes payment as per contracted terms in due course of time.
In the quarter, the company had net forex loss of Rs 3.4 crore against Rs 50 lakh and for the nine month it had foex loss of 16.3 crore against profit of Rs 1.7 crore. This was largely on account of translation losses pertaining to assets/liabilities.