- Revenue surged 18.5% YoY to ₹961 cr, driven by municipal EPC wins.
- Gross margin jumped 227 bps to 25%, pushing gross profit up 30%.
- Adjusted PAT rose 36.8% to ₹96 cr, with net margin now at 10%.
- Valuation at 18x FY28E EPS yields a ₹1,626 target – a ~30% upside from current levels.
- Sector tailwinds: government water‑infra push, ESG‑linked funding, and rising industrial demand.
You missed the water‑tech surge that could supercharge your portfolio.
VA Tech Wabag (VATW) just delivered a Q3FY26 performance that flips the script on many skeptics. While most market chatter stays fixed on high‑growth tech names, the water‑treatment space is quietly rewriting the earnings playbook. Below you’ll find the full story – why the numbers matter, how they fit into broader industry dynamics, and what a disciplined investor should do next.
Why VA Tech Wabag's Margin Expansion Beats Industry Trends
The 227 basis‑point lift in gross margin to 25% is not a fluke. Lower cost of sales stemmed from improved procurement contracts and higher utilization of in‑house engineering teams. In contrast, peers like Tata Projects saw margin compression due to rising raw‑material costs in the same quarter. A stronger margin base gives VATW a wider moat against input‑price volatility, and it also frees cash flow for debt reduction and cap‑ex.
How Municipal EPC Growth Is Fueling VA Tech Wabag's Revenue Surge
India’s municipal water‑treatment market is entering a multi‑billion‑dollar expansion phase, spurred by the Central and State governments’ focus on clean‑water access and the recent amendment to the Labour Code that encourages private participation. VATW’s 18.5% top‑line growth reflects winning several high‑value turnkey contracts in Tamil Nadu and Maharashtra. The company’s end‑to‑end capability – from design to operation – gives it a pricing advantage over pure‑construction firms.
Competitive Landscape: Tata Water vs. VA Tech Wabag vs. Adani Water
While Tata Projects and Adani Enterprises have diversified portfolios, VATW’s pure‑play focus on water and wastewater gives it depth of expertise. Tata’s water segment contributed only 6% of its total revenue last year, whereas VATW derives >70% from water‑related contracts. Adani’s recent push into desalination is promising, but the capital intensity and longer gestation periods make VATW’s EPC model comparatively nimble and cash‑generative.
Historical Water Infrastructure Cycles and What They Teach Us
Looking back to the 2009‑2012 period, Indian water‑infra spend accelerated after the National Rural Drinking Water Programme was launched. Companies that scaled during that window – such as VA Tech’s predecessor – enjoyed a 4‑5× earnings multiple uplift over the next five years. The current cycle mirrors that pattern: heightened policy focus, increased foreign‑direct investment in ESG‑linked projects, and a pipeline of 1,200+ megaprojects slated through FY28.
Technical Indicators: 18x FY28E EPS Valuation Explained
Geojit’s 18x FY28E earnings multiple translates to a target of ₹1,626. The multiple sits below the historical 20‑22x average for Indian infrastructure peers, implying a discount relative to sector peers. Moreover, the price‑to‑book ratio remains under 2x, and the debt‑to‑EBITDA ratio has slipped to 1.3x, indicating a healthier balance sheet that can support a higher multiple as earnings scale.
Investor Playbook: Bull vs. Bear Cases
Bull Case: Continued municipal funding, successful execution of the pipeline of contracts, and margin improvement drive earnings to exceed FY28E forecasts. A multiple expansion to 22x is plausible, pushing the stock to ~₹2,100 – a 30%‑40% upside.
Bear Case: Delays in project approvals, cost overruns, or a slowdown in government spending could compress margins back to 22% and stall revenue growth. In such a scenario, the stock may retreat to the 12‑13x earnings multiple range, targeting around ₹1,100.
Given the strong earnings momentum, attractive valuation, and sector tailwinds, the balanced view leans toward a BUY with a target of ₹1,626.