PSP Projects Ltd. share price target

Cyclical business fundamentals worsened in Q1FY20 Singapore GRMs remained depressed at US$ 3.5/bbl (+8% QoQ, 43% YoY), while petrochemical cracks likely declined ~15% QoQ. We see earnings pressure for RIL and OMCs aggravated by softer light-heavy crude spreads. Higher oil prices (+8% QoQ) offer some respite to upstream PSUs. Lower spot LNG prices (27% QoQ) could lift margins and drive robust earnings for CGD companies, but raise uncertainty over GAIL and PLNG's earnings....

We attended a group meeting with Prahaladbhai Patel, CMD and CEO of PSP Projects (PSPPL). Following are the key takeaways: Targeting ~Rs 35bn near-term bid opportunity: PSPPL has identified several key projects due for award in the near term: (i) Rs 8.5bn riverfront project in Gujarat (multiple small-ticket works of Rs 500mn each); (ii) Rs 8bn unfinished residential project of Nayara Energy in Jamnagar, Gujarat (bids submitted in Mar'19; JMC, PSPPL, Capacite participated); (iii) Rs 15bn residential-cumschool building project of Vedanta in Barmer, Rajasthan; (iv) Rs 1.8bn building project for Gujarat Science City, Ahmedabad; (v) others worth Rs 3bn in Gujarat....

PSP is maxing out on execution at current order book levels of Rs 30bn. It needs to replenish its order book and increase the average size of new order wins. Tailwinds provided by the SDB project execution augurs well for meeting qualification requirements of large government/private orders. PSP needs to increase its share of order book in the Mumbai/Bengaluru regions and reduce reliance on Gujarat. We believe further re-rating is contingent on this successful transformation. We maintain BUY. Key risks (1) Delay in diversification; (2) Slow private capex recovery; and (3) High interest rates. We maintain BUY on PSP with an increased TP of Rs 579/sh (vs Rs 550 earlier). We have upgraded our FY21E Rev/EBITDA/APAT estimate by 4.4/4.4/5.2%

PSP Projects Ltd (PSP), reported a mixed set of numbers. Although the company maintained healthy growth trend; momentum slowed partially in the last quarter of previous financial year.

Maintain BUY with a TP of Rs 603/sh (18x Dec-20E EPS). With a large contribution of ~Rs 0.9bn revenue coming from SDB (~Rs 2.3bn in 9MFY19) PSP posted a strong 53/24% YoY/QoQ top line growth. Margins continued to remain at the upper end of the 12-14% guidance band. With no significant interest outgo, PAT came at Rs 215mn (+41/22% YoY/QoQ).

PSP Projects Ltd (PSP), an efficient and organised constructor in the medium ticket size institutional and industrial construction segment, reported strong set of numbers in Q3FY19.

PSP Projects Ltd (PSP) is an efficient and organised constructor in the medium ticket size institutional and industrial construction segment in and around Gujarat.

We maintain BUY with TP of Rs 576/sh (18x Mar-20E EPS). PSPs 2QFY19 revenue of Rs 2.3bn (+50.4%YoY, -10.5% QoQ) was largely driven by the SDB project (~Rs 560mn). EBITDA margin came in at 14%, about 100bps higher than management guidance. PSP has won Rs 3.8bn of orders in 2QFY19 (in addition to Rs 520mn in 1QFY19) majority of which are repeat orders. Order book is now Rs 25.8bn.

PSP Projects Ltd (PSP), an efficient and organised constructor in the medium ticket size institutional and industrial construction segment, reported strong set of numbers in Q2FY19.

PSP reported 50.4% YoY growth in revenue to `2.1 bn (2.6% below estimates) led by robust execution particularly in SDB project worth `560 mn. Excluding SDB, revenue up 10.3% YoY to `1.5bn. EBITDA margin expanded by 64bps YoY to 14.0% (116bps above estimates), primarily led by lower other expenses which was partially offset by higher construction and employee expense. PAT grew by 38.7% YoY to `176 mn (4.0% above estimates) led by robust operating performance. Order book at 2.9x, enhances revenue visibility...