Buy This Small-Cap Construction Stock With Target Price Of Rs 715, Recommended By Top Brokerage Firm

IDBI Capital, a leading brokerage firm, has recently published a report on PSP projects Limited, a small cap Civil Construction company. The brokerage has recommended 'buy' the stock of the company for a target price of Rs 715/share. The Brokerage claims 20% potential upside, considering the current market price and the estimated target price.

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 has a market cap of Rs 2,153.16 crore.

Stock Outlook & Returns

The current market price of the stock is Rs 598.10 apiece. The stock, on 26 August 2021 hit the 52 week low at Rs 410.30 and on 19 July 2022, it hit the 52-week high level at Rs 671.50, respectively. ROE of the stock is 24.25%. The dividend yield is 0.84% having Rs 10 face value.

Returns over the past 5 years

Over the past 1 week, the stock has surged 2.15%. Whereas, in the past 1 month, it has given a negative return of 6.03%. However, in the past 3 months, it gave a high return compared to the past 1 month, around 24.06%. Over the past 1 year, the stock surged 43.5%. Whereas, in the past 3 years, it gave 17.26%. In the past 5 years, it gave a massive 86.96% positive return.

Bullish on precast segment

PSP is expecting good opportunity from precast segment in commercial and building space. Current precast facility can generate revenue up to Rs2.5bn (capex done ~Rs1.2bn); company expects to reach capacity generation of Rs5bn by FY24. And the segment could contribute 20% to its topline in FY24E. 

Funds flow and balance sheet

Total fund and non-fund based limit stood at Rs10.5bn and 50% is utilised. Company is currently not looking at equity fund raising for next 4-6 month, but will consider the same if they receive large size projects. Balance sheet remain lean with net cash of Rs0.8bn as Q1FY23. 

Status could change on slow moving order

Bhiwandi and Pandharpur projects (16% of the order book) are the only slow moving projects in Order book. And clarity is expected with-in this year on these orders.

Bright outlook

The brokerage said, "We met the management of PSP Projects Ltd (PSP). Company has maintained its FY23E guidance on revenue (at Rs22bn), EBITDA margin (11-13%) and order inflow (at Rs22bn). After achieving 60% of order inflow target (incl Rs7.5bn received post June-22), PSP is eying incremental inflow from Nestle, Maruti, central vista & DLF. On slow moving order book, Bhiwandi project matter is in court and resolution deadline is extended to September (previously August). Precast is another growth area and on low base, revenue contribution is expected to increase to 20% of revenue in FY24E from 11% in FY23E."

 

Buy for a target price of Rs 715/share

The brokerage said, "We reiterate BUY rating on PSP with Target Price of Rs715 at 12x FY24E EPS. Key positives in PSP are its execution ability with stable cash flow, consistent order win in the building construction segment and lean balance sheet for growth."

Disclaimer

The stock has been picked from the brokerage report of IDBI Capital. 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.