Rekha Jhunjhunwala portfolio’s smallcap multibagger has another admirer with buy recommendation. What’s the trigger?

Down 23% from its 52-week high, shares of Va Tech Wabag have received favorable views from analysts who anticipate a turnaround. The stock, part of Rekha Jhunjhunwala’s portfolio, has seen a sharp decline after a stellar rally, making it a small-cap multibagger.

Despite the recent fall, Va Tech Wabag has delivered 104% returns over the past year, significantly outperforming the Nifty50’s nearly 7% gain.

Va Tech Wabag is trading well above its 200-DMA, placed at Rs 1,375, which is acting as strong support, with resistance at Rs 1,650. Nilesh Jain, Vice President and Head of Equity Research (Technical and Derivatives) at Centrum Broking, recommends accumulating the stock as a positional bet.

However, the stock’s potential upside is expected to be driven more by fundamental triggers than technical factors, given the ongoing market volatility.

Triggers for the next leg of the rally

Yes Securities’ Lead Analyst, Aniket Jain, considers Va Tech Wabag’s non-binding equity partnership with international investors to invest up to $100 million in a dedicated “Municipal Platform” as a strong positive.

The initiative will focus on capital projects in the municipal water sector.“The platform presents opportunities worth $1 billion over the next 3-5 years, initially focusing on projects in India, followed by South-East Asia and select African markets. India is witnessing a surge in PPP-based projects, including Namami Gange, Yamuna cleaning, and various state-led initiatives under the HAM or BOT model. This platform will allow VATW to expand its order book and bid for larger, capital-intensive projects without financial constraints, all while maintaining an asset-light strategy,” Jain said in a note.

Yes Securities reiterated a ‘Buy’ rating with a target price of Rs 1,750, based on an FY27 EV/EBIT multiple of approximately 16x or an FY27 PE multiple of 24x. “The multiple reflects strengthening financials, expected revenue growth in FY26/27, improving margins, and free cash flow generation, coupled with a solid order pipeline,” Jain added.

Yes Securities estimates Va Tech Wabag’s FY25E net profit at Rs 290 crore, reflecting a 16% year-on-year increase from Rs 250 crore in FY24. Revenue is projected to grow 11% to Rs 3,127 crore in FY25 from Rs 2,827 crore in FY24.

For Q3 FY25, the company reported a 12% year-on-year rise in consolidated profit after tax (PAT) at Rs 70 crore, compared to Rs 63 crore in the year-ago period. Revenue increased 17% YoY to Rs 825.8 crore in the October-December quarter.

Shares of Va Tech Wabag fell by Rs 85, or 5.5%, on the NSE today, closing at Rs 1,480.

(Disclaimer: Recommendations, suggestions, views, and opinions expressed by experts are their own and do not represent the views of The Economic Times.)