Systematix bullish on water EPC; initiates 'Buy' on VA Tech Wabag, EIEL

Systematix has set a target price of ₹1,840 for VA Tech Wabag, implying an upside of 53 per cent, and ₹346 for Enviro Infra Engineers, indicating an 83 per cent potential gain

Domestic brokerage Systematix Institutional Equities has turned positive on India’s water engineering, procurement and construction (EPC) space, citing long-term structural drivers and significant under-penetration in wastewater treatment. The brokerage initiated coverage on VA Tech Wabag and Enviro Infra Engineers with a 'Buy' rating, citing strong growth prospects for companies positioned across the water treatment value chain.

 

The brokerage has set a target price of ₹1,840 for VA Tech Wabag, implying an upside of 53 per cent, and ₹346 for Enviro Infra Engineers, indicating an 83 per cent potential gain, based on FY28 earnings estimates. Analysts pointed to rising water stress in India, low wastewater treatment capacity, and increasing adoption of advanced technologies as key factors underpinning the bullish outlook on the sector.

 

 

Additionally, the increasing global water shortage presents a strong structural opportunity for the water and wastewater treatment industry. While freshwater accounts for about 2.5 per cent of the earth’s total water, “less than 1 per cent is readily accessible through rivers, lakes and groundwater,” the brokerage noted.

 

According to Precedence Research, Systematix said the global water and wastewater treatment market, valued at around $347.9 billion, is projected to grow at a 6.5 per cent CAGR to reach $652.3 billion by 2034, on the back of urbanisation, industrial growth and stricter environmental regulations. It added that the adoption of advanced treatment technologies, including ultraviolet disinfection and chemical processes, is improving efficiency, while rising population and agricultural demand are likely to sustain long-term growth, especially as over 40 per cent of the global population lives in water-stressed regions.

Systematix on VA Tech Wabag

According to Systematix Institutional Equities, VA Tech Wabag is well positioned to benefit from the structural upcycle in the water EPC space, given its end-to-end capabilities across desalination, drinking water and industrial wastewater treatment. The brokerage highlighted the company’s strong order book, industry tailwinds, improving profitability and expanding global footprint as key positives.

 

VA Tech Wabag’s order book stands at about ₹160 billion, nearly 4.9 times its FY25 revenue, providing multi-year revenue visibility. The brokerage expects steady order inflows over the next three years, supported by a shift towards higher-margin projects and a growing contribution from operations and maintenance (O&M), which the company is targeting at around 20 per cent of revenue to ensure stable cash flows.

 

Additionally, the company’s post-Covid ‘Wriddhi’ strategy has helped transition the business to a more technology-led, asset-light model, improving margins and maintaining a net cash position for 11 consecutive quarters. Systematix also pointed to opportunities from international markets, particularly the Middle East and North Africa, where large desalination and wastewater projects offer better contract quality and payment security.

 

Citing strong sector tailwinds and an estimated 15 per cent revenue CAGR over FY25–28E, the brokerage valued the stock at 22 times FY28 earnings and initiated coverage with a 'Buy' rating and a target price of ₹1,840.

Systematix on Enviro Infra Engineers

Analysts said Enviro Infra Engineers is emerging as a key beneficiary of rising investments in sewage and wastewater infrastructure in India. The brokerage highlighted the company’s strong execution capabilities in sewage treatment plants (STPs), common effluent treatment plants (CETPs) and water treatment plants (WTPs), alongside an expanding geographic footprint.

 

Enviro Infra Engineers has an EPC order book of about ₹18.8 billion, or nearly 1.8 times FY25 revenue, and management has guided for a 35–40 per cent revenue CAGR over the next three to four years. The company is expanding into new markets such as Bihar, Delhi and southern India, after establishing a presence in Odisha and Maharashtra, and is supported by a bidding pipeline of around ₹80 billion with a historical success rate of about 40 per cent.

 

The brokerage said the company expects strong order inflows, having already secured ₹15.9 billion in FY26 against a full-year target of ₹25 billion. It is aiming for over ₹35 billion in FY27. The company's margins are also expected to remain healthy, with Ebitda guided at 22–24 per cent over the medium term. 

 

Systematix added that Enviro Infra Engineers’ entry into renewables is likely to further diversify earnings. Valuing the stock at 15 times FY28 earnings, the brokerage initiated coverage with a 'Buy' rating and a target price of ₹346, implying an upside of 83 per cent.  Disclaimer: The views or investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.