PSP Projects Ltd. share price target

Surat Diamond project (SDB) revenues were soft in Q2 FY21 due to low labor availability(whichimprovedonlyinAugust).SDBrevenuesareexpectedtopick upfromQ3FY21onwards.TheQ2FY21monthlyexecutionrateofRs.220mnis expectedtoriseto500600mnonmonthlybasisinQ3forSDB.TheCompany...

Revenue increased by 43.6% YoY in FY20 to Rs15 bn vs. Rs10.4 bn in FY19. SDB's revenue too increased by 52.7% YoY in FY20 to Rs5.4 bn (36.2% of revenue) vs. Rs3.55 bn (34% of revenue) in FY19. EBITDA margins down 153 bps YoY to 12.7% in FY20 vs. 14.3% in FY19. Reported PAT increased by 43.2% YoY in FY20 to Rs1.29 bn vs. Rs902 mn in FY19. PSP received order inflow of Rs15.8 bn in FY20 vs. Rs14.15 bn in FY19, a growth of 11.5% YoY. PSP's orderbook as on Jun'20 stands at Rs29.6 bn and is L1 in GIDC project worth Rs2.75 bn. Including the same, orderbook stands at Rs32.35 bn...

PSP Projects Ltd (PSP) reported its Q1FY21 numbers. Delay in execution due to lockdown and lack of manpower availability impacted the performance.

PSP Projects Ltd (PSP) reported better than expected numbers in a quarter which was impacted by lack of labour availablity and lockdown.

PSP delivered robust 3QFY20 performance led by SDB project execution. Base business run-rate ex-SDB of Rs 2.3bn/qtr needs to ramp up to provide growth visibility beyond FY21E as SDB will get completed by Dec-20E. New order wins augur well for growth. Recent award outside Gujarat of Rs 3.4bn in Varanasi is directionally well placed for de-risking Gujarat exposure. We remain cautious on rising share of Govt order in mix. These projects come with interest bearing advances and large BG requirement. Besides PSP needs to arrange 25% cash margin for availing BG's. We maintain BUY. Key risks (1) Delay in diversification outside Gujarat; (2) Delays in new order conversion & (3) Further delay in SDB Project execution. PSP delivered Rev/EBIDTA/APAT beat of 43/32/25% on back of robust execution in SDB project. We maintain BUY with an increased TP Rs 607/sh TP vs Rs 590/sh earlier (we value EPC business at 15x FY21E EPS vs 16x earlier). We have increased our FY20E/FY21E EPS estimates by 7/3%.

PSP Projects Ltd (PSP), reported a robust set of numbers that exceeded our expectations.

Change in estimate/TP/Reco.: Owing to price correction, we have upgraded PSP from NEU to BUY. We have cut NCCs FY20/21E EPS estimates by 4.3/13.6% to factor in delay in stuck AP projects re-start and weak order inflows. We cut our TP from Rs 127/sh to Rs 111/sh . Maintain BUY. Top Picks: LT, PNC, KNR & Capacite. Pick-up in ordering yet to play out: Subdued economic growth, tight liquidity, subpar tax collections and limited private capex has impacted projects awarding activity. Our interaction with the EPC companies/NHAI suggests that roads project awarding will pickup from Jan-20E end. We estimate Rs 550bn of NHAI awards during 4QFY20E. Private capex is still subdued with companies deferring even OPEX spends. Recent governement announcement on Rs 102tn National Infrastructure Pipeline till FY25E is a welcome step though ambitious. Silver lining lies in the hope that we are yet to reach peak ordering and average P/E peer valuation is supportive at 4x FY21E EPS.

With bids placed for orders worth ~Rs 20bn, PSP expects to replenish it order book and maintain order book-to-bill ratio at around 2.5-3x. With 48 project currently under execution and the Bhiwandi EWS project, contributing ~19% of the outstanding order book, expected to contribute to revenues from 4QFY20 onwards, the drop in expected revenue from SDB project is expected to be compensated to some exxtent by execution in other projects and we expect the company to achieve ~25% top-line growth in FY20 (in line with the guidance). We believe that diversification beyond Gujarat market may further aid re-rating. We maintain NEU with a one notch reduction in multiple to factor in the delay of up to 10 months in Surat Diamond Bourse Project. Key risks (1) Delay in diversification outside Gujarat; (2) Delays in new order conversion & (3) Further delay in SDB Project execution. PSP delivered Rev/EBIDTA/APAT beat of 14/13/29%. We maintain the stock at NEU with a TP Rs 590/sh TP vs Rs 579/sh earlier (we value EPC business at 15x FY21E EPS vs 16x earlier). We have revised our FY20E/FY21E EPS estimates by 6/9%.

PSP Projects Ltd (PSP), reported a stellar set of numbers which exceeded our expectations. Revenue in Q2FY20 grew by 49% YoY to INR 312 cr against less than 30% quarterly growth trend.

With bids placed for orders worth ~Rs 25-30bn, PSP expects to replenish it order book and maintain order book-to-bill ratio at around 2.5-3x. Opportunities in affordable housing schemes coupled with expansion into newer geographies like Maharashtra and Karnataka would enable the company to scale its operations and help grow and maintain sufficient order book backlog. We believe further re-rating is contingent on this successful transformation. We upgrade PSP to BUY. Key risks (1) Delay in diversification outside Gujrat; (2) Delays in receipt of new awards & (3) Slowdown in Private capex. PSP delivered Rev/EBIDTA/APAT beat of 12/12/15%. Owing to recent price correction we upgrade the stock to BUY from NEU with Rs 579/sh TP (we value EPC business at 16x FY21E EPS). We have maintained our FY21E Rev/EBITDA/APAT estimates.