Buy PSP Projects; target of Rs 558: Dolat Capital Market

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Dolat Capital Market's research report on PSP Projects

PSP reported results in line with estimates. PSP posted 7.8%/ 13.2%/ 16.6% YoY de-growth in revenue/ EBITDA/ APAT to Rs3.9 bn/ Rs469 mn/ Rs307 mn in Q3FY21. SBD revenue – Rs1.35 bn vs. Rs1.9 bn (Q3FY20). We broadly maintain our FY21E/ FY22E/ FY23E estimates. Labour strength is back at pre covid levels of 100% which stood at 95% in (Q2FY21) vs. 75-80% (Q1FY21) vs. 20-25% in Apr’20. We expect a 6.0%/ 6.1% 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 21.2%/ 21.3% 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 558 (13x FY23E EPS).

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