Choice Equity Broking's report on PSP Projects
Our core investment thesis on PSPPL remains unchanged: With the entry of Adani Group entity (Adani Infra) as a promoter shareholder, we believe there is better order book visibility. However, in this SPA & Open Offer deal (details mentioned below), margin compression is likely to be seen ahead. PSPPL management has indicated that business from the Adani Group will be executed on a cost-plus basis. In our view, Adani Group is a cost champion and would strive to get the best deal for their shareholders, which implies potential pressure on PSPPL’s margin,.
Outlook
We take a more holistic approach to valuing PSPPL using a DCFbased model. The model takes into consideration 10-year explicit forecast period up to 2035E and terminal growth rate of 2%, which yields a TP of INR 720/share.
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