Maintain BUY on PSP Projects - Q4FY21 - In-line quarter - HDFC Securities

Mr Parikshit D Kandpal, CFA, HDFC Securities and Mr. Chintan Parikh, Institutional Research Analyst, HDFC Securities

PSP Projects (PSP) reported revenue/EBITDA/APAT at INR 5/0.6/0.4bn for the quarter, largely in line with our estimate. The company witnessed turnaround in terms of order inflow as it bagged projects worth INR 22bn during the quarter. With that, the order book stood at INR 41bn at the end of FY21. PSP has guided for INR 20/18bn inflow/revenue and 11-12% EBITDA margin for FY22. As the Surat Diamond Bourse (SDB) project is coming to an end, PSP would qualify for the larger projects, leading to rerating of the stock. We have tweaked our FY22/FY23 estimates to account for the robust order inflow in 4QFY21 and impact of higher commodity prices on the margins. We maintain BUY on PSP with a TP of INR 510/sh (roll forward Mar-23, 12x Mar-23E EPS).

4QFY21 financial highlights: PSP registered revenue of INR 5bn (+10/+28% YoY/QoQ), in line with our estimate. EBITDA came in at INR 621mn (+23/32% YoY/QoQ), a miss of 6%, on higher-than-expected material costs. EBITDA margin stood at 12.4% (+133/+36bps YoY/QoQ, vs estimate of 13.0%). Aided by lower-than-expected depreciation/taxes, APAT came in at INR 407mn (+19/+33% YoY/QoQ, in-line).

Ex-slow moving projects, OB at INR 34bn: With order wins of INR 24.4bn in FY21, OB increased to INR 41bn. Bhiwandi EWS project remains stuck and now costs have escalated by INR 700mn. PSP has received show cause notice for slow progress and the company has got stay on BG encashment as it believes delay is from client side. In the worst case, PSP can walk out with INR 140mn hit (INR 70mn BG encashment and INR 70mn owing to site mobilisation). Pandarpur project has slipped into a slow lane as cash flow from the client has slowed. Excluding these slow moving orders, OB stood at INR 34bn at the end of FY21. Despite the truncated OB, we believe INR 18bn topline is achievable as execution of UP projects ramps up. The current bid pipeline is at INR 30bn, with Gujarat accounting for INR 23bn. PSP to focus on healthcare, airports, and educational segments for growth.

Comfortable balance sheet position: Standalone gross debt decreased to INR 708mn (D/E 0.13x) from 748mn at FY20-end. Receivables, unbilled revenue and retention money stood at INR 2.2/0.8/0.9 bn respectively. With precast factory coming to completion, Capex would normalise at 3-4% of sales.

Shares of PSP Projects Ltd was last trading in BSE at Rs.421.2 as compared to the previous close of Rs. 436.55. The total number of shares traded during the day was 27465 in over 1238 trades.

The stock hit an intraday high of Rs. 433.95 and intraday low of 416.15. The net turnover during the day was Rs. 11660657.

Source : Equity Bulls

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