Issue Date: 18 December 2024
Promising outlook
QEWS benefits from a stable business model, while a likely increase in domestic capacity over the next five years enhances growth prospects. Hence, we maintain our target price at QAR 20.5. In our view, QEWS is trading at attractive valuations after correcting around 9% since our last report and we assign a Buy rating (previously, Accumulate) on the stock.
Revenue growth to accelerate over the next 5 years
- We estimate QEWS’ domestic water & power capacity to grow for the first time in about 10 years by FY28e with the phased implementation of a new project, boosting 5-year revenue CAGR till FY28e to 6% (vs. 3% in the previous 5 years till FY23).
– Various projects planned/ongoing overseas (not modeled due to the lack of some specific details) carry the potential to boost revenue growth.
Organizational rejig to aid in profitability improvement
- Margins, though likely to weaken in FY24e, are expected to expand thereafter, partly aided by recent organization restructuring aimed at improving operational synergies.
- Prudent financial management: QEWS utilized its healthy cash flow generations to pare its debt while funding overseas expansion.