PSP Projects hits record high as it emerges L1 bidder for a govt project

Shares of PSP Projects rallied 5 per cent to hit a record high of Rs 747.40 in Tuesday’s intra-day trade, after the company emerged as lowest bidder (L1) for a government project worth Rs 1,364. 5 crore (excluding GST) of construction of state of the art high rise office building at Surat, Gujarat.

The stock of civil construction company surpassed its previous high of Rs 746.50, which it had touched on December 20, 2022. At 09:54 AM; it tradedd 3.3 per cent higher at Rs 732, as against 0.04 per cent rise in the S&P BSE Sensex.

As on September 30, 2022, PSP Projects' order book was healthy at Rs 5,081 crore (2.9x book to TTM revenues). Additionally, the company secured orders worth around Rs 2,045 crore post Q2FY23, which strengthened its order book further. Overall, the total order inflow amounts to Rs 3,310 crore in FY23.

PSP Projects had guided for total inflows of Rs 2,500-3000 crore in FY23E (vs. Rs 1,802 crore of projects secured in FY22). With current inflows, analysts at ICICI Securities believe that it has exceeded the overall inflows target, which will boost the overall revenue growth visibility in FY24.

"With better opportunities coming from both - government and private clients, its expansion into different states and improved eligibility of higher-ticket size projects, the company is likely to witness a strong growth trajectory ahead," the brokerage firm said.

Meanwhile, in the past one month, PSP Projects outperformed the market as shares surged 18 per cent, as against 3 per cent decline in the S&P BSE Sensex.

On December 15, CARE Ratings reaffirmed PSP Projects’ credit rating for its long term and short Term bank facilities based on the recent developments including operational and financial performance of the company. Analysts expect PSP to benefit in the medium term with the government's thrust on healthcare and education sector, along with reconstruction of marquee government buildings under central vista scheme.

Meanwhile, analysts at IDBI Capital PSP Projects believe that since L1 and few orders are in advance stage, the actual inflows could be Rs 3,500 crore.

"Revenue growth guidance maintained. Execution is picking up post subdued Q2FY23, implying H2FY23 year-on-year revenue growth at 35 per cent plus," the brokerage firm said.