Top 5 Water Infrastructure Stocks to Watch Right Now

1. Ion Exchange (India) Ltd.

Ion Exchange (India) Ltd. Is a major player in the water treatment industry, offering a comprehensive range of solutions across the entire water cycle. Their services include pre-treatment, process water treatment, wastewater treatment, recycling, zero liquid discharge, sewage treatment, packaged drinking water, and seawater desalination.

The company stands out as one of Asia’s largest one-stop solution providers. Recently, Ion Exchange has made significant strides with a new product designed to remove uranium from groundwater, gaining popularity in rural areas for its cost-effectiveness.

Ion Exchange expanded its footprint by acquiring 100% of M/s Mapril in Portugal, enhancing its presence in Europe. The company primarily operates in the engineering, procurement, and construction (EPC) sector, boasting a market capitalization of Rs 76.1 billion. As of March 31, 2024, its engineering order book and pipeline stood at Rs 34.5 billion. On April 1, 2024, the company secured a contract worth over Rs 2.5 billion in the United Arab Emirates (UAE).

With a diverse client base that includes industry giants like Reliance, NTPC, IOCL, JSW, and Tata Group, Ion Exchange reported an 18% year-on-year (YoY) sales growth and a marginal profit increase of 0.09%. The company maintains an operating profit margin (OPM) of 11.5% and delivered a one-year return of 27.5%.

International demand for Ion Exchange’s engineering solutions is robust, with exports accounting for 22% of sales and significant order inflows from the international market in the recent quarter. The company is well-positioned to benefit from recovery in both domestic and international markets, coupled with increased industrial activity.

2. VA Tech Wabag Ltd.

VA Tech Wabag Ltd. Is India’s largest and the world’s third-largest water infrastructure company, with a market capitalization of Rs 69 billion. Known as one of the top five global players in desalination, VA Tech Wabag primarily secures orders from government entities for drinking water treatment, municipal and industrial wastewater treatment, and sludge treatment.

The company focuses on building water treatment facilities from the ground up as an EPC player and is present in over 25 countries. In FY24, it earned 47% of its revenue from exports and 83% from the EPC segment, with the remaining revenue from the operation and maintenance (O&M) business.

VA Tech Wabag is expected to see its operating profit grow by 25-30% annually over the next two years, driven by industry tailwinds and a focus on high-margin segments and global business. Despite a YoY sales decline of 3.5%, the company reported a remarkable profit growth of 407.5%, with an OPM of 12.8% and a one-year return of 128.1%. The order book is valued at Rs 11.4 billion, divided between 56% EPC and 44% O&M. The company’s shares surged 166% in the past year, after a period of stagnation.

3. Jash Engineering Ltd.

Jash Engineering Limited, a key member of the Jash group, has evolved into a specialized manufacturer of equipment for water, wastewater, and seawater conveyance, pumping, and treatment. Over 50% of its revenue comes from exports. Headquartered in Indore, Jash operates five state-of-the-art manufacturing facilities, four in India and one in the US, with a combined potential output close to Rs 7 billion.

Jash Engineering is expanding its manufacturing capabilities to Rs 10 billion and plans to invest Rs 700-750 million over FY26-27 in its Chennai and America units. The company is constructing a new plant in Chennai, set to be commissioned in December 2024.

Targeting a revenue of Rs 6.7 billion for FY25, Jash expects Rs 2.8 billion from India and Rs 3.9 billion from international markets. By FY28, the company aims for a revenue of Rs 10 billion. With a market capitalization of Rs 29.3 billion, Jash demonstrated YoY sales growth of 47.4% and profit growth of 41.7%, with an OPM of 25.6% and a one-year return of 106.4%. The consolidated order book stood at Rs 8.1 billion as of May 2024, supporting projected revenues of Rs 6.7 billion for FY25. Jash plans an annual capex of Rs 200-250 million over the next three years.

4. Felix Industries Ltd.

Felix Industries Ltd, established in 2012, focuses on providing comprehensive water and environmental solutions with a commitment to recycling, reusing, recovering, and reducing. The company boasts over 450 proprietary technologies, including physicochemical, biological, membrane-based, and hybrid treatments, managing water across various applications such as drinking water, industrial processes, and wastewater treatment.

Operating in diverse sectors like water treatment, e-waste management, piping solutions, and specialty chemicals, Felix Industries has a market capitalization of Rs 5.2 billion. The company reported impressive YoY sales growth of 136.9% and profit growth of 438.5%, maintaining a robust OPM of 34.3% and achieving a one-year return of 339.8%.

Felix Industries’ financial performance is marked by a CAGR of 259% over the past year. The company’s return on equity (ROE) was 14%, and the return on capital employed (ROCE) was 16%. With net income growth of 74% over the last five years, Felix has outperformed industry averages, attributed to strategic decisions like high earnings retention and efficient management practices.

5. NCC Ltd.

NCC Ltd. Is a construction company with a strong ability to manage complex projects from start to finish, contributing positively to society through the construction of schools, hospitals, roads, bridges, houses, offices, and more. With a pan-India presence and offices across 13 cities, NCC has 12+ projects under execution as of FY24, valued at Rs 32 billion.

Focusing on constructing industrial and commercial structures, as well as roads, bridges, and flyovers, NCC also undertakes projects in housing, power transmission, irrigation, and hydrothermal power. Internationally, NCC operates in Oman and the UAE.

The company is eyeing new contracts under the JJM, with current JJM orders amounting to Rs 180 billion. NCC’s revenue grew nearly 35% YoY to Rs 52.6 billion, while EBITDA grew around 34% YoY to Rs 5 billion, maintaining an EBITDA margin of 9.6%. Net profit increased 37% YoY to Rs 2.3 billion. The stock has gained more than 135% in a year, with a market capitalization of Rs 136.8 billion.

Here’s a quick view of the above-mentioned companies based on some crucial financial parameters :

1. Ion Exchange (India) Ltd.

• Market Capitalization: Rs 76.1 billion

• Order Book and Pipeline: Rs 34.5 billion (as of March 31, 2024)

• Recent Contract: Rs 2.5 billion in UAE (April 2024)

• Sales Growth: 18% YoY

• Profit Growth: 0.09% YoY

• Operating Profit Margin (OPM): 11.5%

• One-Year Return: 27.5%

• Export Sales Contribution: 22%

2. VA Tech Wabag Ltd.

• Market Capitalization: Rs 69 billion

• Revenue from Exports: 47% (FY24)

• Revenue from EPC Segment: 83% (FY24)

• Order Book Value: Rs 11.4 billion

• Sales Growth: -3.5% YoY

• Profit Growth: 407.5% YoY

• Operating Profit Margin (OPM): 12.8%

• One-Year Return: 128.1%

• Share Surge: 166% over the last year

3. Jash Engineering Ltd.

• Market Capitalization: Rs 29.3 billion

• Revenue Target (FY25): Rs 6.7 billion

• YoY Sales Growth: 47.4%

• YoY Profit Growth: 41.7%

• Operating Profit Margin (OPM): 25.6%

• One-Year Return: 106.4%

• Order Book (May 2024): Rs 8.1 billion

• Annual Capex Plan: Rs 200-250 million for next three years

4. Felix Industries Ltd.

• Market Capitalization: Rs 5.2 billion

• YoY Sales Growth: 136.9%

• YoY Profit Growth: 438.5%

• Operating Profit Margin (OPM): 34.3%

• One-Year Return: 339.8%

• CAGR (Last Year): 259%

• Return on Equity (ROE): 14%

• Return on Capital Employed (ROCE): 16%

• Net Income Growth (Last Five Years): 74%

5. NCC Ltd.

• Market Capitalization: Rs 136.8 billion

• Revenue (YoY Growth): 35% to Rs 52.6 billion

• EBITDA (YoY Growth): 34% to Rs 5 billion

• EBITDA Margin: 9.6%

• Net Profit (YoY Growth): 37% to Rs 2.3 billion

• One-Year Stock Gain: 135%

• JJM Orders: Rs 180 billion

In Conclusion, Water supply infrastructure is crucial, impacting everything from food production to drinking water and air quality. With over 60% of global energy consumption directed towards building and maintaining basic infrastructure, the water sector in India presents a compelling investment opportunity.

Companies across various segments, from pipes and EPC to water treatment technologies, are showing strong order books and healthy project pipelines. As they focus on innovation and addressing water scarcity challenges, these companies are well-positioned for growth. Investors should closely observe both qualitative and quantitative aspects before investing in this promising sector.

Disclaimer: This article is for informational purposes only and is not a stock recommendation.