Top 11 Water Sector Stocks: Key Players in a Growing Market

The water sector has been gaining significant attention from investors due to increasing global water scarcity and the urgent need for sustainable water management solutions. Companies operating in this sector are involved in various segments, such as water infrastructure, treatment, equipment, and pumps.

Leading Players in Water Infrastructure

The Indian water sector boasts a diverse range of companies catering to different needs within the water infrastructure space. Here, we examine some prominent players:

• Welspun Corp Ltd is a significant player in the pipe segment, boasting a market capitalization of Rs 14,207.21 crore and YoY sales and profit growth of 77.69% and 656.19%, respectively. With an operating profit margin (OPM) of 9% and a return over 1 year of 97.3%, the company is a strong contender in the water sector. Welspun Corp offers comprehensive pipe solutions, including line, ductile iron, and stainless-steel pipes, alongside building materials like water storage tanks. Besides holding a robust order book valued at Rs 9056 crore in pipe solutions, the company anticipates substantial growth opportunities both domestically and internationally in core sectors such as Oil & Gas, Water, Infrastructure, Defence, Power, and Plastics. The company observes a structural shift underway in these sectors, fostering optimism for sustained growth over the next 5 to 7 years.
• Ion Exchange Ltd Ion Exchange Ltd primarily operates in the Water Engineering, Procurement, and Construction (EPC) sector, with a market capitalisation of Rs 7,619.34 crore. It has reported year-on-year sales growth of 18.01% and a marginal profit increase of 0.09%. The company maintains an Operating Profit Margin (OPM) of 11.58% and has delivered a one-year return of 27.59%. With 22% of its sales coming from exports, Ion Exchange Ltd has seen robust international demand for its engineering solutions, as evidenced by significant order inflows during the recent quarter. As of 31st March 2024, its Engineering Order Book and Pipeline amount to Rs 3456 crore. The company boasts a diverse client base that includes prominent names such as Reliance, NTPC, NPC, IOCL, JSW, CPCL, L&T, ArcelorMittal, Nippon Steel, Nayara Energy, IRCTC, BHEL, and Tata Group.
• VA Tech Wabag Ltd is India’s largest and the world’s third-largest water infrastructure company, with a market cap of Rs 6,908.40 crore and YoY sales and profit growth of -3.52% and 407.54%, respectively. The company has an OPM of 12.82% and a return over 1 year of 128.11%. The company’s order book is valued at Rs 11,448.4 crore, split between 56% EPC and 44% Operations & Maintenance (O&M). It is also among the top 10 global players in desalination.
• Shakti Pumps Ltd specializes in pumps, motors, and controllers, Shakti Pumps has a market capitalisation of Rs 5,202.11 crore. It recorded year-on-year sales growth of 41.65% and a substantial profit increase of 487.28%. The company maintains an Operating Profit Margin (OPM) of 16.40% and has delivered a notable one-year return of 326.57%. Shakti Pumps leads the market in solar pumps, commanding a 26% share, and holds an order book valued at Rs 2,400 crore. Recently, it successfully raised Rs 200 crore through a Qualified Institutional Placement (QIP) and holds 13 patents. The company’s annual manufacturing capacity stands at 500,000 units, with a presence spanning over 118 countries.
• Roto Pumps Ltd is renowned for its production of Progressive Cavity Pumps, boasting a market capitalisation of Rs 1,498.47 crore. The company achieved year-on-year sales growth of 21.58% and a profit increase of 17.95%. It maintains an Operating Profit Margin (OPM) of 23.88% and has delivered a one-year return of 36.64%. Roto Pumps operates three manufacturing plants and has established a presence in 55 countries, with over 275,000 pumps installed globally. The company is poised to launch its solar pumping segment this year. Additionally, Roto Pumps has commenced commercial production of Downhole Pumps at its advanced manufacturing facility in Greater Noida.
• EMS Ltd operates within the Water Engineering, Procurement, and Construction (EPC) sector, holding a market capitalisation of Rs 2,940.14 crore. The company achieved year-on-year sales growth of 28.28% and a profit increase of 29.20%. It maintains an Operating Profit Margin (OPM) of 19.14% and has delivered a one-year return of 87.41%. Since its inception, EMS has successfully executed 68 projects and currently holds an order book valued at Rs 12,083 crore, slated for completion over the next 2-3 years. Looking ahead, the company targets to achieve Rs 21,000 crore in revenue by FY25.

Water Treatment and Equipment Specialists

• Jash Engineering Ltd, a prominent player in the treatment equipment segment, commands a market capitalisation of Rs 2,934.66 crore. The company demonstrated robust year-on-year sales growth of 47.41% and profit growth of 41.79%, boasting an Operating Profit Margin (OPM) of 25.69% and a notable one-year return of 106.41%. With a consolidated Order Book amounting to Rs 816 crore as of May 1st, 2024, Jash Engineering aims to achieve projected revenues of Rs 675 crore for FY25, up from Rs 522 crore in FY24, while maintaining Profit After Tax (PAT) margins in the range of 12-14%. The company plans a capex of Rs 20-25 crore annually over the next three years to support its growth initiatives.
• Taylormade Renewables Ltd, focusing on treatment equipment, holds a market capitalisation of Rs 520.48 crore and has achieved a one-year return of 39.72%. The company maintains an Operating Profit Margin (OPM) of 16.64%. Taylormade Renewables is recognised for its expertise in membrane technology for the safe evaporation of hazardous wastewater using solar energy. Additionally, it is developing solutions for treated input water targeted at applications in green hydrogen production and the semiconductor industry. The company’s current order book stands at over Rs 330 crore, reflecting its strong position in the market.

Other Notable Players

• SPML Infra Ltd operates primarily in the Water EPC sector, with a market capitalisation of Rs 766.99 crore. The company achieved significant year-on-year sales growth of 49.35%, despite facing a decline in profits by -738.24%. It currently maintains an Operating Profit Margin (OPM) of 1% and has delivered a strong one-year return of 315.72%. SPML Infra has successfully managed and executed over 650 EPC projects and is actively engaged in developing infrastructure projects. The company’s current order book stands at Rs. 1,300 crore. Notable clients include PHED, PGCIL, NTPC, Jal Jeevan Mission, and various state water boards.
• Felix Industries Ltd operates in diverse sectors including water treatment, e-waste management, piping solutions, and specialty chemicals. The company has a market capitalisation of Rs 529.32 crore and reported impressive year-on-year sales growth of 136.99% and profit growth of 438.58%. It maintains a robust Operating Profit Margin (OPM) of 34.33% and has achieved a substantial one-year return of 339.87%. Felix Industries is known for its innovative water reclamation solutions, including Water & Wastewater Recycling Systems, as well as E-Waste Recycling Systems.
• Atam Valves Ltd operates within the valves segment with a market capitalisation of Rs 241.88 crore. The company recorded a modest year-on-year sales growth of 7.33%, although it experienced a decline in profits by -22.37%. It maintains a healthy Operating Profit Margin (OPM) of 18.61% and has delivered a modest one-year return of 4.10%. Atam Valves currently holds an order book valued at approximately 60 crore. Looking ahead, the company aims to achieve a revenue target of 75 crore by FY25 and has ambitious plans to reach Rs 1,000 crore in revenue by 2032.

Investment Considerations in the Water Sector

The water sector in India presents a compelling opportunity for investors. Companies across various segments boast strong order books, indicating healthy project pipelines. Financial metrics such as operating margin (OPM) can be considered to assess profitability. Forward P/E ratios can provide insights into investor expectations for future earnings growth.

From established players in pipes and EPC to those specializing in water treatment technologies, the sector caters to the evolving needs of water management. With a focus on innovation and addressing water scarcity challenges, these companies are well-positioned for growth.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.