Top 5 Water Treatment Stocks for Sustainable and Profitable Investments in 2024

As global challenges such as climate change, population growth, and technological advancements continue to reshape the world, water management has become an increasingly critical focus. Water plays a vital role across numerous industries including agriculture, food production, and even semiconductor manufacturing, yet it remains a limited resource with few viable alternatives. The essential nature of water, combined with its growing scarcity, presents a compelling thematic investment opportunity for those seeking stability and consistent returns. This blog delves into five water treatment stocks that should be on every investor’s watchlist.

1-Thermax

A Pioneer in Integrated Solutions

Thermax leads our list with its comprehensive range of innovative solutions across heating, cooling, power, water waste management, air pollution control, and chemicals. A significant milestone for Thermax occurred on April 15, 2024, with the opening of its first manufacturing facility for water and wastewater treatment solutions in Pune. This facility marks a substantial step in Thermax’s aim to exceed a Rs 10 billion order book in its water and wastewater solutions business, primarily targeting commercial and industrial sectors.

Growth and Innovation

Thermax’s water and waste solutions sector has seen remarkable growth, tripling over the past four years and currently expanding at an annual rate of 20-30%. With a history spanning four decades, recent years have seen significant momentum in their business operations, including the reuse and recycling of water, sewage treatment, and effluent management. Notably, Thermax offers seawater desalination solutions aimed at reducing freshwater consumption and conserving water.

Advanced Technologies and Sustainability

The new Pune facility supports advanced technologies such as reverse osmosis (RO), sewage treatment plants (STP), effluent recycling systems (ERS), and zero liquid discharge (ZLD) solutions. Designed with sustainability in mind, the factory operates entirely on solar energy and includes rainwater harvesting infrastructure. By collaborating with approximately 1,000 vendors from across Maharashtra and other regions, the plant addresses diverse sectors from industrial to residential applications.

Financial Performance

Thermax has reported impressive financial performance, with a revenue growth of 29.9% on a compounded annual growth rate (CAGR) basis from the financial years 2021 to 2023. Net profit growth was equally robust, showing a CAGR of 47.6%. Moving forward, Thermax plans to further strengthen its presence in the water treatment sector.

2- Welspun Enterprises

Infrastructure Focus

Welspun Enterprises, part of the US$ 2.7 billion Welspun group, focuses on infrastructure projects, particularly in the road and water sectors. With an ambitious target to grow its order book from Rs 55 billion to over Rs 150 billion within the next three years, water remains one of the largest segments of their portfolio.

Major Projects and Partnerships

Welspun Enterprises is the lead partner in a joint venture with Kaveri Infraprojects Ltd, executing a major water supply project for rural areas in Varanasi, Ayodhya, and Meerut in Uttar Pradesh, covering 2,544 villages. Additionally, the company secured a significant order from the Brihanmumbai Municipal Corporation (BMC) to design, build, and operate a 2,000 million litres per day water treatment plant at Bhandup Complex in Mumbai.

Revenue Growth

The company’s order book also includes the Rural Water Supply Project under the Centre’s Jal Jeevan Mission in Uttar Pradesh, and a 418 MLD Waste Water Treatment Facility (WWTF) project at Dharavi, Mumbai. Welspun Enterprises reported a revenue growth of 34.3% CAGR from 2021 to 2023, with net profit growing at an impressive CAGR of 69.3%.

3-Ion Exchange

Global Pioneer

Mumbai-based Ion Exchange is a global pioneer in water, wastewater treatment, and environment solutions, serving industries, institutions, homes, and communities. With over 100,000 installations worldwide, Ion Exchange remains a leader in the water management industry.

Strategic Collaborations

In a notable collaboration, Ion Exchange and The Energy and Resources Institute (TERI) have entered into a TADOX® Technology and Trademark License Agreement to commercialize TERI’s patented wastewater treatment technology for industrial applications. Additionally, in March 2024, Ion Exchange secured a contract worth approximately Rs 1.2 billion to set up a water treatment plant in Saudi Arabia for Maaden, a leading mining company.

Financial Performance and Expansion

Ion Exchange reported revenue growth of 17.2% CAGR from 2021 to 2023, with net profit growth at 16.4% CAGR. The company plans to expand into new geographies and develop new products to further enhance its revenue and profits.

4- Va Tech Wabag

Global Water Technology Leader

VA Tech Wabag, based in Chennai, is a leading global player in water technology, offering comprehensive solutions for water and wastewater treatment, desalination, and industrial water treatment. With a presence on four continents and over 6,000 projects executed in more than 30 countries, Va Tech Wabag stands out in the water management industry.

Strategic Initiatives and Contracts

The company aims to position itself as a key water partner for organizations focused on green hydrogen production, leveraging its expertise in ensuring a secure and clean water supply for this emerging sector. Recently, Va Tech Wabag received a Rs 850 million order from Nama Water Services in Oman for the operation and maintenance of the Al Duqm Desalination Plant for five years.

Financial Growth

Va Tech Wabag has reported a revenue growth of 17.2% CAGR from 2021 to 2023, with net profit growth of 16.4% CAGR. The company is focused on implementing new orders and expanding its business to new areas.

5-EMS

Comprehensive Services

Formerly known as EMS Infracon, EMS provides comprehensive water and wastewater collection, treatment, and disposal services, primarily focusing on government projects. The company recently received a work order worth Rs 4.8 billion for developing a water supply and sewerage system, encompassing construction, operation, and maintenance over 18 years.

Strategic Projects

EMS also secured a Rs 3.6 billion Letter of Intent from the Uttarakhand government for a sewage system project in Raipur and Dehradun. These projects emphasize efficient water management and wastewater treatment, positioning EMS as a significant player in the water and sanitation sector.

Financial Performance

EMS demonstrated revenue growth of 26.7% CAGR from 2021 to 2023, with net profit growing at a CAGR of 25.4%. The company plans to expand its operations by securing new orders from different state municipalities.

In Conclusion, The Indian government’s initiatives, such as JJM, Jal Shakti, and Atal Bhujal Yojana, have significantly boosted the country’s water supply and sewage infrastructure. The market for water and wastewater treatment is projected to grow from US$ 1.3 billion in 2020 to US$ 2.1 billion in 2025, presenting substantial opportunities for investment.

Water treatment companies like Thermax, Welspun Enterprises, Ion Exchange, Va Tech Wabag, and EMS are well-positioned to capitalize on this growing demand. However, it is crucial for investors to conduct thorough research to ensure that their investment aligns with their financial objectives and risk tolerance. By doing so, investors can make informed decisions and potentially benefit from the long-term growth prospects of the water treatment industry.