Buy PSP Projects; target of Rs 548: Dolat Capital Market

Dolat Capital Market's research report on PSP Projects

PNC posted 22.2%/ 43.3%/ 56.0% YoY de-growth in revenue/ EBITDA/ APAT to Rs2.4 bn/ Rs245 mn/ Rs144 mn in Q2FY21. SBD revenue – Rs656 mn vs. Rs881 mn (Q2FY20). We broadly maintain our FY21E/ FY22E estimates and introduce FY23E. Labour strength is back at pre covid levels of 95% which stood at 75-80% (Q1FY21) vs. 20-25% in Apr’20. We expect a 7.1%/ 7.5% revenue/ Adj. PAT CAGR over FY20-23E, with EBITDA margins of 11.2%/ 13.0%/ 13.0% for FY21E/ FY22E/ FY23E. 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 FY20-23E.

Outlook

PSP will continue to witness superior return ratios (average RoE/ RoCE of 21.8%/ 21.9% over FY20-23E), due to a strong PAT growth in FY22E, well-managed lean balance sheet and efficient working capital management. We maintain BUY, with a TP of Rs 548 (13x Sep’22E EPS).