Earnings Call Transcript Analysis Report #
Financial Performance #
Key Financial Metrics: #
- Consolidated 9M FY25 Revenue: INR 2,138 crores (up 11% YoY).
- Standalone 9M FY25 Revenue: INR 1,835 crores.
- Consolidated 9M FY25 EBITDA: INR 289 crores (up 11% YoY).
- Standalone 9M FY25 EBITDA: INR 264 crores.
- Consolidated 9M FY25 PAT: INR 196 crores (up 13% YoY), 9.2% margin.
- Standalone 9M FY25 PAT: INR 172 crores.
- Net Cash Position (Dec 2024): INR 262 crores (excluding HAM entity debt).
- Asset-Light Net Cash: INR 379 Crores.
- Gross Cash Position: INR 659 Crores.
- ROCE: ~18%.
- ROE: 14.5%.
- Order Book: Exceeding INR 14,200.
Comparison with Previous Periods: #
- Consolidated revenue grew over 11% year-over-year.
- Consolidated EBITDA grew by around 11% year-over-year.
- Consolidated PAT grew at over 13% year-over-year.
- Like-to-like basis (excluding divested European entities) consolidated EBITDA for 9M grew by 14% YoY and PAT grew by 17% YoY.
Revised Guidance/Forecasts: #
- Management reiterated their confidence in sustaining revenue and profit expansion.
- Maintain healthy EBITDA margins, aligned with medium term outlook of 13%-15%.
- Management maintain 15-20% revenue growth over the medium term (3-5 Years).
Areas of Growth/Decline: #
- Growth in revenue, EBITDA, and PAT.
- International business contributed 48% of 9M revenues.
- O&M business contributes 19% of nine months revenue and 42% of the order book.
Strategic Initiatives & Business Updates #
Major Strategic Announcements: #
- Long-term rating upgrade to Ind AA- with a ‘Stable’ outlook by India Rating and Research (Fitch Group).
- Secured four significant orders:
- INR 3,251 crores for 200 MLD Al Haer Independent Sewage Treatment Plant in Riyadh, KSA (Wabag’s share ~INR 1,725 crores).
- INR 121 crores for 7-year O&M of BAPCO Refining Industrial Wastewater Treatment Plant in Bahrain.
- INR 700 crores for design, build, and operate order in Zambia.
- INR 145 crores order from Chennai Petroleum Corporation Limited.
- Centenary celebration with events in Vienna, Riyadh, Delhi, and Chennai.
New Products/Services/Markets: #
- Focus on desalination, water re-use, and effluent treatment projects.
- Expanding presence in emerging markets: Middle East, Africa, Indian sub-continent, Southeast Asia, and CIS countries.
- Blue Seed initiative to support startups.
Operational Changes: #
- Divested 3 European subsidiaries in the last 2 years to focus on emerging markets.
Ongoing/Completed Projects: #
- 400 MLD Perur Desalination Project in Chennai is progressing well.
- Pagla Project in Bangladesh is getting back on track after initial disruptions.
Market & Competitive Landscape #
Industry Trends: #
- Focus on Jal Jeevan Mission extension until FY28, but Wabag not directly involved in most projects.
- Emphasis on cleaning up riverfronts (e.g., Yamuna) presents significant opportunities.
- Strong focus on water sector growth in emerging markets.
Competitive Positioning: #
- Positioned as a global leader in advanced water technology.
Market Challenges/Opportunities: #
- Significant opportunities in emerging markets due to infrastructure development.
- Opportunities in cleaning up riverfronts in India. *Less opportunities in developed countries.
Market Share/Positioning: #
- Reinforces leadership position in the Middle East region.
Risk Factors & Challenges #
Concerns/Challenges: #
- Initial disruptions in the Pagla Project in Bangladesh due to geopolitical situations.
Market Uncertainties: #
- Retendering of a Saudi Arabia project due to client-related decisions.
Forward-Looking Statements #
Outlook/Projections: #
- Expect more orders in the coming months.
- Confident in ability to sustain revenue and profit expansion.
- Expect the fourth quarter to be the “bumper quarter”.
Commitments/Targets: #
- Maintain net cash positive position.
- Maintain 13%-15% window of EBITDA Margins.
Planned Investments/Priorities: #
- Continue focus on emerging markets and advanced technology projects.
- Enhancing presence in Middle East, Africa, Indian sub-continent, Southeast Asia, and CIS countries.
Sentiment: #
- Overall positive and confident sentiment about future performance.
Q&A Insights #
Most Pressing Questions: #
- Impact of Jal Jeevan Mission extension.
- Execution timelines for Chennai and Bangladesh projects.
- Reasons for margin fluctuations.
- Impact of U.S. aid stoppage on the Bangladesh project.
- Status of a cancelled Saudi Arabia order.
- Order pipeline and inflow guidance.
- Dividend policy.
- Competitors achieving higher EBITDA margins.
Management Responses: #
- Provided clear explanations on project progress and timelines.
- Reiterated commitment to medium-term financial outlook.
- Addressed concerns about Bangladesh project and Saudi Arabia tender.
- Explained dividend policy in relation to investment in projects.
- Acknowledged competitors’ higher margins but focused on their own strategy.
Indirect Answers: #
- Declined to provide specific order inflow guidance for FY26.
- Did not provide IRR targets on order.
- The exact payment terms for the Saudi Arabia project were directed to be taken offline.
- Details regarding the differences in the retendered Saudi Arabia project were not provided.
New Information: #
- Expectation of securing INR 2,000-2,500 crores worth of projects in the next 2-3 months.
- Confirmation that the re-tender for the Saudi Arabia project is underway.
- Bid-to-win ratio is generally 30% to 40%.
- Confirmed the 100 cities plan for extending the HAM Model.
Management Tone & Sentiment #
Overall Tone: #
- Confident and optimistic.
Areas of Confidence/Concern: #
- Strong confidence in order book, pipeline visibility, and ability to grow.
- Confidence in managing project risks and execution.
- No major areas of concern expressed, but acknowledged potential for project delays.
- Mentioned that they are celebrating 100 years.
Summary of Most Important Takeaways #
- Strong Financial and Operational Performance: Wabag demonstrated solid financial growth in 9M FY25, with increases in revenue, EBITDA, and PAT. The company maintains a strong order book and net cash position.
- Strategic Focus: The company is strategically focused on emerging markets, advanced technology projects (desalination, water re-use), and O&M contracts.
- Positive Outlook: Management is confident about future growth, citing a robust order pipeline and opportunities in key markets.
- Rating Upgrade: The credit rating upgrade to AA- is a significant positive, enhancing the company’s market perception and business opportunities.
- Anniversary: The year marks the 100th anniversary.