VaTech Wabag stock is a good buy

VaTech Wabag India Ltd. is a leader in the Indian water technology market with a complete Wabag portfolio in the areas of municipal and industrial water and wastewater treatment. The company was founded in 1996 at Chennai and currently holds a market share of over 15% in the country. With a presence across the complete value chain of water spectrum, Wabag is the best play in the water scarcity theme. As an extension, the company has also introduced an engineering centre of global standards under its umbrella of services. The company has been accredited with top quality management systems and has many municipalities and cities as its satisfied clients. Huge investment will be required for water supply, sewerage treatment and O&M services in the country over the next decade and specialty companies like VaTech Wabag, with a significant presence and proven track record, stand in the forefront. Moreover, there are immense business opportunities in emerging geographies like Vietnam, Turkey, Philippines, Saudi Arabia, et cetera and the global water industry is estimated to become a USD 500 billion market in the next few years. The company is quite comfortable with a strong order book and visible new orders across segments and geographies. The government’s flagship initiatives like Namami Gange, Swachh Bharat and Smart Cities would drive the potential order growth as each of the above initiatives entail at least Rs 500 billion worth of opportunities. Delhi Jal Board and Ganga Rejuvenation projects are incremental opportunities for the company which could double its order book position and provide significant business traction. The stock currently quoting at Rs 545 on the Indian bourses trades at 17 times the FY 17 earnings, which is a premium to its average valuation. However, given its niche as a pure water solution provider, cash rich balance sheet, excellent track record, technological advantage, marquee client list and huge opportunities available in the domestic and overseas market, the VaTech Wabag stock has an upside of more than 30%  in the next one year from the present levels. With the Q4 FY16 earning season round the corner and not much fireworks expected in key corporate results, the stock markets are hoping the monsoon don’t disappoint this time. That is why it is important to add protection during the current market situation to safeguard against sudden declines like the one we saw in Jan-Feb 2016. It would be prudent for investors to stay away from the market for the next 2-3 weeks to avoid volatility and uncertainty.