Buy This Small cap construction Stock For Rs 760 Target Price, Shares Surged 7.14% In A Week

ICICI Direct in its recently published report on PSP Projects Ltd. has given "Buy" call to the stock of the company for a target price of Rs 760 apiece. Incorporated in 2008, PSP Projects (PSP) is one of the prominent contractors offering a diversified range of construction and allied services. Its focus remains on industrial, institutional, government, government residential and residential projects. PSP Projects is a small cap construction sector company having a market cap of Rs 2,325.60 crore.

PSP reported 34.3%, 31.2%, 31.3% CAGR in topline, EBITDA, PAT CAGR, respectively, during FY17-22. Prudent management with net debt-free, robust return ratios (RoCE: 25+%). The price of PSP Projects recently hit the 52-week high, and is currently trading at its all-time high. The report from ICICI Direct suggests the stock has an 18% potential upside from the current market price.

Stock Outlook

The Current Market Price (CMP) of the stock is Rs 644.90 apiece. The 52-week low level of the stock is Rs 416.10 apiece and the 52 week high level is Rs 673.90 apiece, respectively. Stock is trading near the 52-week high as it hit the 52 week high on 15 September 2022. 

Returns on Investment

The stock in the past 1 week, gave nearly 7.14%. It has given 5.24% in the past 1 month and 27.3% in the past 3 months, respectively. Whereas, over the past 1 year, the stock gave 47.81% positive return. Over the past 3 years, the stock has given 25.93% positive return. It has given nearly 84.18% positive return over the past 5 years.

Key management meet highlights

We recently met a) Prahladbhai Patel, Chairman and Executive Director, and b) Hetal Patel, Chief Financial Officer in order to get key insights on the company's business and performance.

PSP has secured projects worth Rs 1,344 crore at YTD FY23 level. With a strong order pipeline, it is aiming at overall order inflows of Rs 2,500+ in FY23.

Execution has picked up in most projects (except two projects in Maharashtra) with the availability of desired level of manpower and land.

PSP has reiterated its guidance of 25% YoY topline growth (to ~Rs 2,200 crore) for FY23 with margin in the range of 11-13% over the medium term.

Buy for a target price of Rs 760 apiece

PSP's share price has grown at 13% CAGR over the past five years (from Rs 350 in September 2017 to Rs 653 levels in September 2022). "We maintain our BUY rating on the company. We value PSP at Rs 760/share," the brokerage said.

Key triggers for future price performance

• PSP's pre-qualification for public projects has increased to Rs 2,300+ crore. Addition of big ticket sized project to boost its overall order book position. 
• Diversification in select states offers a bigger opportunity pie. Further, significant traction in the pre-cast facility to bring incremental revenue. 
• Expect revenue CAGR of 15.3% in FY22-24E.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.