Buy PSP Projects, target price Rs 705: HDFC Securities

HDFC Securities has buy call on PSP Projects with a target price of Rs 705. The current market price of PSP Projects Ltd. is Rs 601.75. Time period given by analyst is one year when PSP Projects Ltd. price can reach defined target.

PSP Projects Ltd., incorporated in the year 2008, is a Small Cap company (having a market cap of Rs 2290.50 Crore) operating in Construction sector.

PSP Projects Ltd. key Products/Revenue Segments include Contract Revenue and Other Operating Revenue for the year ending 31-Mar-2021.


Financials
For the quarter ended 30-06-2022, the company reported a Consolidated Total Income of Rs 353.66 Crore, down -36.78 % from last quarter Total Income of Rs 559.37 Crore and up 10.21 % from last year same quarter Total Income of Rs 320.89 Crore. Company reported net profit after tax of Rs 29.03 Crore in latest quarter.

Investment Rationale
PSP Projects (PSP) reported weak revenue/EBITDA/APAT of INR 3.5/0.5/0.3bn, missing estimates at all levels. PSP faced festive season related reduced labour availability issues in the early part of Q1FY23, leading to weak execution and revenue booking. Its entire order book (OB) of INR 46bn (excl. Bhiwandi and Pandharpur forming 16% of it) is under execution, and execution is expected to pick up during the rest of 9MFY23. Post the completion of SDB project, PSP is now eligible to bid for a single project worth INR 25bn. The current bid pipeline stands at INR 40bn, of which 51% orders are from Gujarat and 41% are private. The topline is expected to grow by 25% YoY in FY23, with order inflow guidance at INR 20bn. We maintain BUY on PSP with a TP of INR 705/sh (13x Mar-24E EPS).

Promoter/FII Holdings
Promoters held 70.39 per cent stake in the company as of 30-Jun-2022, while FIIs owned 1.89 per cent, DIIs 4.82 per cent.