Buy This Small-Cap Construction Stock For Target Price Of Rs 660, Gave 28.72% Returns In 3 Months

Axis Direct in its recently published report on PSP Projects Ltd. has given a buy call to the stock of the company for a target price of Rs 660 apiece. Considering the estimated target price by the brokerage, the stock could surge 10% if the stock of the company is purchased at the current market price. PSP Projects is a small cap Construction Company with market capitalization of Rs 2,175.66 crore.

 Stock Outlook

The current market price of PSP Projects Ltd. stock is Rs 604.35. Currently, the stock is trading Rs 194.05 above the 52-week low and Rs 67.15 below the 52-week high, respectively.
 
The stock hit the 52-week low at Rs 410.30/share on 26 August 2022, and the 52 week high at Rs 671.50 apiece on 19 July 2022. The ROE of the stock is 24.25%.
 

Returns On Investment

The stock in the past 1 week, surged 0.83%. Over the past 1 month, it has fallen 6.94%. Whereas in the past 3 months. It has given a positive return of 28.72%.  over the year, it gave a 43.74% positive return. In the past 3 years, it gave a 21.27% positive return and in the 5 years, it gave a massive 88.92% positive return. 
 

Order Inflow

The company expects an order inflow of Rs 2,500 Cr in FY23, out of which Rs 1,050 Cr is received till date. It has bid for projects with Nestle, Maruti, and MRF. The management has received an inquiry for a DLF project worth Rs 1,500 Cr in Delhi. Total order book as of date stands at Rs 4,613 Cr giving revenue visibility for next two years.

Precast Facility

The management is in discussion with L&T for an infrastructure project, and expects to seal the deal soon. The company has initiated 2 buildings for industries in the precast facility and received an inquiry for warehouse orders. It has also invested Rs 120 Cr in the precast facility and expects a revenue of Rs 250 Cr. With the additional investment of Rs 150 Cr and considering the huge potential in the precast market, the company expects revenue generation in the range of Rs 500-1,000 Cr moving ahead. 

Surat Diamond Bourse

The company received the project completion certification and is now qualified to bid for projects with a ticket size of Rs 2,000-2,500 Cr. 

UP Project

Delay in the UP Medical school project was due to an increase in cement and steel prices and a delay in the land acquisition. However, the work has now picked up and is expected to be completed by the end of Q1FY24. 

Management Guidance

Revenue growth to be in the range of 15-20% with a target revenue of Rs 2,200 Cr in FY23. Margins are likely to be in the range of 11- 13% and Capex to be in the range of 3-4% per year going forward. 

The Bhiwandi project case in Maharashtra is still going on in court. The next hearing is scheduled in Sept,2022.

Outlook

During Q1FY23, the company faced project execution hurdles due to a shortage of aggregates, and a long-drawn marriage season in UP, affecting its revenue growth. However, the management has indicated that the execution will improve substantially post-monsoon season and it maintains its target of achieving revenue of Rs 2,200 Cr in FY23, which would be led by better order inflows.

Buy for a target price of Rs 660/share

Axis Direct commenting on the stock has said, "We expect the company to deliver Revenue/EBITDA/APAT growth of 26%/36%39/% CAGR over FY21-FY24E. Currently, the stock is trading at 12x and 9.5x FY23E and FY24E EPS. We value the company at 10.5x FY24E EPS to arrive at the Target Price of Rs 660/share, implying an upside potential of 13% from the current levels."

About - PSP Projects Limited

PSP Projects Limited is a multidisciplinary construction company offering a diversified range of construction and allied services across industrial, institutional, government, government residential and residential projects in India. It provides its services across the construction value chain, ranging from planning and design to construction and post-construction activities, including MEP work and other interior fit-outs to private and public sector enterprises. Historically, it was more focused on projects in the Gujarat region. More recently, it has actively expanded its geographical presence to other states and diversified its portfolio of services.

Disclaimer

The stock has been picked from the brokerage report of Axis 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 taking any investment decision.