Recommendation from Construction company
This column gives you a scrip chosen by the research team during the fortnight that is fundamentally strong and expected to give good capital appreciation over a time period of 1 year.[EasyDNNnews:PaidContentStart]
PSP Projects: USHERING INDIA'S DEVELOPMENT JOURNEY
HERE IS WHY
✓ In Q4FY23, revenue rose by 31.54 per cent
✓ Order book stands at Rs 5052 crore
✓ New precast concrete plant in Gujarat
The infrastructure sector plays a vital role in India's economy, serving as a primary driver for overall development. It obtains significant attention from the government, which actively implements policies to facilitate the timely establishment of high-quality infrastructure throughout the country. Its impact extends beyond its boundaries, creating a ripple effect that positively influences various sectors and contributes to the nation's advancement.
According to Mordor Intelligence, the size of India's construction market is around USD 639 billion in 2023 and is anticipated to register a CAGR of over 6 per cent till 2028. In the union budget 2023, the government has allotted ₹10 lakh crore for infrastructure which is a 33 per cent increase in capital investment outlay. To meet India’s aim of reaching a USD 5 trillion economy by 2025, infrastructure development is the need of the hour. Therefore, our choice for this column is the infrastructure company, PSP Projects.
PSP Projects is a multidisciplinary construction company offering a diversified range of construction and allied services across industrial, institutional, government, and residential projects in India. They provide their services across the construction value chain. Historically, they have focused on projects in the Gujarat region. They have completed and continue to undertake construction projects in this region. More recently, they have geographically diversified their portfolio of services and are undertaking or have bid for projects pan India. Some of the company's famous work are SDB, Sabarmati River Front, Prestige FintechGIFT City, Brigade International Financial Center and many more.
In Q4FY23, on a consolidated basis, the company’s revenue rose by 31.54 per cent YoY to ₹729.58 crore compared to ₹554.65 crore from the previous year’s same quarter. On a sequential basis, revenue increased by 45.86 per cent. Net profit stood at ₹48.76 crore compared to ₹54.83 crore, a YoY decreased to negative 11.07 per cent, while sequentially increased by 38.01 per cent.
As of March 31, 2023, the company's outstanding order book stands at ₹5052 crore. The company started focusing on other growing geographical states like Uttar Pradesh from where the outstanding order book stands at ₹1730 crore. Recently, it completed their biggest project of building Surat Diamond Bourse (SDB), which is the world’s largest office building on a single basement. It’s an ₹1850 crore project, with 66 lakh square feet. With the completion of this project, the company has entered the league of handling prestigious projects up to ₹2500 crore.
It has set up a manufacturing plant for precast concrete which will help to increase operating efficiency and margins. The plant is situated near Sanad, Gujarat with a production capacity of 1 million square feet with a total cost of around ₹109 crore. The company is currently trading at a PE of 20.8x as against the industry PE of 37.8x. In the last three years, it has delivered average ROE of 20.4 per cent and ROCE of 27.2 per cent respectively. The company is also having a debt-to-equity of 0.18x with an interest coverage ratio of 6.64x. Taking into account the company’s business and its valuation, we recommend BUY. its valuation, we recommend BUY.
