Maintain BUY on PSP Projects - Muted performance - 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 3/0.4/0.25bn for the quarter, 21/14/7% below our estimate. Labour shortage impacted execution. Despite no new order inflow in Q1FY22, management is confident of achieving its inflow guidance of INR 20bn for FY22. The order book (OB) stands at INR 38bn at the end of Q1FY22. PSP has lowered revenue guidance from INR 18bn to 25-30% YoY growth (INR 16.1bn on the higher end) and increased the EBITDA margin guidance for FY22 to 11.5-13%. We have tweaked our FY22/FY23 estimates to account for this operationally weak quarter. We maintain BUY on PSP and roll forward our TP to INR 542/sh (12x Jun-23E EPS).

Q1FY22 financial highlights: PSP registered revenue of INR 3bn (+196%/- 36% YoY/QoQ), missing our estimate by 21%. EBITDA came in at INR 394mn (30x/-29.2% YoY/QoQ), a miss of 14%. EBITDA margin stood at 12.4% (+1120/+2bps YoY/QoQ, vs estimate of 11.5%). APAT came in at INR 251mn (13x/-38% YoY/QoQ, miss of 7%).

Operationally weak quarter, revenue guidance lowered: The company faced labour shortages for most part of the quarter, which have normalised now. With no order wins in this quarter, OB shrank to INR 38bn. The court stay remains on the Bhiwandi EWS project, whose next hearing will be in the last week of July-21. The Pandharpur project is still in a slow lane, as cash flow from the client has stopped. Work has started on five UP hospital projects while the remaining two have received their design approvals. Revenue from these UP projects will start getting recognised from Q2FY22 and will ramp up significantly from Q3FY22 onwards. On the Surat Diamond Bourse, 50-70% of the pending work will be completed in Q2FY22 and the balance in Q3FY22. The precast facility work has been completed and PSP is talking to a client for potential orders. The current bid pipeline is at INR 30bn, with Gujarat accounting for INR 21bn. The order inflow guidance for FY22 is at INR 20bn.

Comfortable balance sheet position: Standalone gross debt increased to INR 1.2bn (D/E 0.21x), from INR 708mn at FY21-end. Receivables increased to INR 2.8 bn from INR 2.2 bn at FY21-end as collections were delayed. However, PSP has received INR 880 mn in the early part of July-21.

Shares of PSP Projects Ltd was last trading in BSE at Rs. 447.9 as compared to the previous close of Rs. 467.45. The total number of shares traded during the day was 29862 in over 2074 trades.

The stock hit an intraday high of Rs. 477 and intraday low of 445.6. The net turnover during the day was Rs. 13684752.

Source : Equity Bulls

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