Buy PSP Projects; target of Rs 516: Dolat Capital

Dolat Capital's research report on PSP Projects

PSP reported results below estimates on all fronts. PSP posted 65.2%/ 97.0% YoY de-growth in revenue/ EBITDA to Rs1.1 bn/ Rs13 mn in Q1FY21. PSP reported loss of Rs22 mn vs. profit of Rs255 mn (Q1FY20). SBD revenue - Rs456 mn vs. Rs936 mn (Q1FY20). We reduce our revenue/ EBITDA margin/ PAT estimates by 4.4%/ 105 bps/ 15.6% for FY21E considering Q1FY21 results. We broadly maintain our FY22E estimates. Labour strength stood at 75-80% vs. 20-25% in the previous quarter. We expect a 4.8%/ 5.1% revenue/ Adj. PAT CAGR over FY20-22E, with EBITDA margins of 11.2%/ 13.0% for FY21E/ FY22E. PSP refrain from providing any guidance. Given its conservative strategy towards leverage and an efficient capital allocation, PSP will continue to remain a net cash company, with negative Net D:E of 0.4x over FY20-22E. PSP will continue to witness superior return ratios (average RoE/ RoCE of 21.8%/ 22.1% over FY20-22E), due to a strong PAT growth in FY22E, well-managed lean balance sheet and efficient working capital management.

Outlook

We maintain BUY, with a TP of Rs 516 (13x FY22E EPS). Key risk – Order inflows.

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