PSP Projects - Q3FY23 Result Update - Anand Rathi

Strong order accretion but sluggish revenues, we believe, aptly characterise PSP's FY23. Management expects the recent soft execution to fade quickly and its new orders to begin making a real difference, starting Q4 FY23. In light of this, it appears that execution momentum will continue into FY24. We find the Q4 revenue projection to be ambitious, but it, if achieved, fulfilment would reinforce confidence in the company's execution abilities. The bright longer-term outlook continues otherwise, led by recent strong orders added, a sturdy prospects pipeline and a well-set balance sheet.

Strong accretion, sturdy assurance. With orders of ~Rs4.4bn in Q3 FY23, and of ~Rs13.4bn subsequently, ytd additions, at ~Rs33bn, have been strong. With this strong a ytd addition, the OB now (incl. post-Q3), at ~Rs64.2bn, is sturdy, and implies revenue assurance for over three years. The appetite for more stays, and the company looks to close this year with Rs38bn-40bn, and sustain the pace with another ~Rs30bn in FY24. For this, its eyes are already set on an immediate prospects pipeline of ~Rs45bn.

Uttar Pradesh healthcare orders, status update. The contribution rose from ~Rs0.75bn the quarter prior to ~Rs1.65bn, but was still sub-optimal for the potential it entails, and for management's internal estimate of ~Rs2.5bn for Q3. The issues (mostly approval-related) have been resolved, and management looks for it to contribute more meaningfully in coming quarters (~Rs1bn per month targeted in Q4 FY23). At end-Q3, the balance potential was ~Rs10.7bn.

Guidance; FY23 inflows raised, but revenue lowered. With ytd additions ahead of its earlier guidance (of ~Rs25bn), and L1 status in an order of ~Rs3.5bn, it now targets Rs38bn-40bn in FY23. Revenue guidance, though, was pruned from ~Rs22bn to ~Rs21bn, on the soft Q3. Management expects the pace of execution to turn optimal by Q4 FY23, and thus targets ~25% higher revenues in FY24. It sees orders of ~Rs30bn in FY24 to suffice for its growth aspirations.

Valuation. At the CMP, the stock trades at 17.7x TTM EPS of Rs39. We do not have a rating for the company. Risk: Failure to ramp-up execution.

Shares of PSP Projects Limited was last trading in BSE at Rs. 720.60 as compared to the previous close of Rs. 690.25. The total number of shares traded during the day was 24138 in over 1459 trades.

The stock hit an intraday high of Rs. 724.00 and intraday low of 690.30. The net turnover during the day was Rs. 17205448.00.

Source : Equity Bulls

Keywords

PSPProjects INE488V01015 Q3FY23 ResultUpdate AnandRathi