Reviews

In this edition, we have reviewed Va Tech Wabag and KEI Industries. We suggest our reader-investors to REDUCE EXPOSURE in Va Tech Wabag and HOLD in KEI Industries. 


We had recommended VA Tech Wabag in Volume 33, Issue No. 10, dated April 16–29, 2018 under the ‘Choice Scrip’ section, when the stock was trading at Rs508. Our recommendation was based on the company’s positive macroeconomic growth factors, its attractive order book and positive variations. 

VA Tech Wabag Limited is in water treatment field. The company’s principal activities include design, supply, installation, construction and operational management of drinking water, waste water treatment, industrial water treatment and desalination plants. The company provides end-to-end water solutions for drinking water and wastewater plants, both in the municipal and industrial sectors. 

On a quarterly standalone basis, the net sales in Q2FY19 rose 2.88 per cent to Rs520 crore from Rs506 crore in Q2FY18. The EBITDA dropped by 12.93 per cent to Rs49.31 crore in Q2FY19 from Rs56.63 crore in Q2FY18. The net profit also saw a drop of 18.69 per cent to Rs25.58 crore in Q2FY19 from Rs31.64 crore in Q2FY18. 

On an annual basis, the sales increased 3 per cent to Rs1,856.33 crore in FY18 from Rs1,798.38 crore in FY17. The EBITDA improved by 4 per cent to Rs1,665.13 crore in FY18 from Rs1,596.754 crore in FY17, The net profit surged 56 per cent to Rs117.13 crore in FY18 from Rs74.98 crore in FY17. 

After our recommendation, the share price of VA Tech Wabag dropped 59 per cent. Looking at the company’s earnings and noting the fact that its contingent liabilities have reached Rs534 crore, we recommend our readerinvestors to REDUCE EXPOSURE and gradually EXIT. 

 

 

We had recommended KEI Industries in Volume 33, Issue No 16, dated July 9 – 22, 2018 in our ‘Choice Scrip’ section, when the stock was trading at Rs406. We recommended the company as it reflected robust revenue growth backed up by its ongoing expansion and the company’s expected growth in exports.

KEI Industries Limited is engaged in the manufacture and supply of power and other industrial cables. The company’s segments are cables, which consists of extra high voltage (EHV), high tension (HT) and low tension (LT) power cables, control and instrumentation cables, winding wires, and flexible and house wires; stainless steel wires, etc. Its product portfolio includes specialty cables, rubber cables, submersible cables and polyvinyl chloride (PVC)/poly wrapped winding wires. Its products are used in power, oil refineries, railways, automobiles, cement, steel, fertilisers, textiles and real estate sectors. It is engaged in engineering, procurement and construction (EPC) business. It offers fire survival cables, zero halogen cables, braided cables, solar cable, marine and offshore cables and single or multi-core flexible wires. 

On the financial front, on a consolidated basis, the net sales of the company has improved by 32.23 per cent in Q2FY19 and stood at Rs996.79 crore as against Rs753.80 crore in the same quarter of the previous year. The profit before interest, depreciation and tax (PBIDT) of the company came in at Rs100.83 crore in Q2FY19 as against Rs76.25 crore in Q2FY18, posting a growth of 32 per cent. The profit after tax (PAT) in Q2FY19 was Rs41.37 crore, posting a jump of 45.15 per cent from 28.50 crore in Q2FY18. 

Since our recommendation, the stock price of KEI has declined by 13 per cent, but looking at the company’s robust earnings, we recommend a HOLD.

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