Buy PSP Projects; target of Rs 579: HDFC Securities

HDFC Securities' research report on PSP Projects

In-line execution: PSP reported in-line 4QFY19 execution at Rs 3.4bn (+28/30% YoY/QoQ). Led by strong 14.8% margins (ahead of the 12-14% guidance band), it posted a 15% APAT beat. Interest expense is low at Rs 32mn (+7/39%YoY/QoQ) as PSP remains net cash. PSP avails short term funding against FD facility. Order book robust – PSP has added orders worth ~Rs 6bn (~Rs 14bn in FY19) taking the order book to Rs 29.8bn (a healthy 2.9x FY19 book to bill). Webelieve PSP is likely to exceed its conservative ~Rs 15bn inflow guidance for FY20E given it is already in the final stages of securing ~Rs 2.5bn apart from being in the fray for ~Rs 35bn worth of works including 2 large projects in Barmer (Rs17bn – residential colony for Vedanta) and Jamnagar (Rs 7.5bn) SDB Project update: SDB accounted for ~Rs 1.2bn of 4QFY19’s revenue. With a pending contract value of ~Rs 11.6bn, PSP expects to clock ~Rs 7-8bn here in FY20E. Update
on consolidated operations: While the metro depot project (partnership) is on the verge of completion (~Rs 550mn execution in FY19), the Gift City project has been paused due to delay of payments (~6-7 months, ~Rs 70mn revenue booked inFY19). In USA – sales in the Livermore project are expected by Jun-end (~Rs $ 3mn revenue potential vs $ 2.4mn cost incurred)) whereas the San Francisco project is still a while away (~$ 25mn revenue potential).

Outlook

We maintain BUY on PSP with an increased TP of Rs 579/sh (vs Rs 550 earlier). We have upgraded our FY21E Rev/EBITDA/APAT estimate by 4.4/4.4/5.2%.

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