PSP Projects LtdQ2 FY23Construction

PSP Projects Ltd

Q2 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Revenue guidance

Category 3

→The company maintains a revenue guidance of Rs. 2,600 crores for FY24, with no change currently.
→Order inflow target for FY24 is set at more than Rs. 3,000 crores.
→Bid pipeline stands at around Rs. 6,000 crores, indicating substantial future opportunities.
→Growth expected from 7 UP projects, with Rs. 450 crores expected to be completed by March 2024 and ongoing MEP/interior works.
→Surat municipal project revenue expected near Rs. 300 crores in FY24, increasing significantly in FY25 due to finishing activities.
→Expansion potential in precast and building components to increase capacity and future revenues.
→Government infrastructure projects, particularly in Gujarat (which announced Rs. 5 lakh crore investment over 5 years), coupled with private capacity expansion, are expected to drive growth over the next 2-3 years.
→Future revenue growth linked to winning large projects, including redevelopment tenders and JV participation, especially in bridge-related projects.

Category 3

→Revenue guidance for FY24 is maintained at around Rs. 2,600 crore to Rs. 4,000 crore, with order inflow target above Rs. 3,000 crore.
→EBITDA margin expected to remain stable in the 11%-13% range, depending on project execution stages.
→Net profit for Q1FY24 increased 29% YoY, indicating improving profitability trends.
→Interest cost expected to reduce as repayments are made, potentially improving net profits.
→Working capital investments and inventory in UP projects may normalize by year-end, aiding cash flows.
→Large government projects and infrastructure developments (e.g., Gujarat's Rs. 5 lakh crore budget) provide growth opportunities.
→Order book and bid pipeline remain robust at over Rs. 5,300 crore and Rs. 6,000 crore respectively, supporting future revenue growth.
→Capex planned at 3%-4% of revenue for capacity expansion aligned with incoming inquiries.

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Yes

→PSP Projects Limited is increasing its borrowing limits:
→ - Current overall limit is around Rs. 1,050 crore (Rs. 120 crore fund-based).
→ - They plan to increase it to Rs. 1,500 crore with fund-based limits around Rs. 145 crore.
→ - Maximum authorized borrowing limit is kept at Rs. 3,000 crore to maintain flexibility as needed.
→The increase in bank guarantee (non-fund-based) limits is planned to facilitate large projects like station redevelopment.
→No explicit mention of any new equity fundraising in the call.
→Debt increase justified by investments in inventory for UP projects and higher working capital needs due to order book growth.
→Current outstanding debt increased significantly from Rs. 145 crore (Mar 2023) to Rs. 282 crore (Jun 2023), expected to stabilize around Rs. 180-200 crore by year-end after repayments.

Yes

→Outstanding order book as of June 30, 2023: Rs. 5,321 crore (15% YoY growth).
→Private projects constitute 46%; Government projects 55%.
→48 ongoing projects: 81% in Gujarat, 19% in Uttar Pradesh.
→UP projects outstanding order book: Rs. 576 crore, with Rs. 450 crore expected to be completed by March 2024.
→Order inflow during Q1FY24: Rs. 758 crore (excluding GST).
→Order inflow target for FY24: More than Rs. 3,000 crore.
→Bid pipeline estimated around Rs. 6,000 crore.
→Expected bidding for large airport and railway projects in Delhi and Ahmedabad through JVs.
→Dharoi Dam development phases II and III bidding expected around Rs. 350 crore each.
→Order book excludes outstanding Bhiwandi and Pandharpur orders due to arbitration and court proceedings.

Yes

→CAPEX is typically 3% to 4% of revenue, mainly on the project side (Page 16).
→Rs. 20 crores CAPEX approved for Precast facility; capacity remains the same but can expand with new inquiries, potentially increasing to 2-3 million sq. ft. in the future (Page 15).
→Future expansions possible for beam, column, and slab lines depending on inquiries (Page 15-16).
→Precast plant has been expanded partially for infrastructure, including manufacturing ducts for the bullet train to be supplied to L&T (Page 9, 15).
→No fixed current CAPEX plan; decisions depend on incoming inquiries and market demand (Page 16).
→Investment on UP projects includes inventory mainly for MEP works to ensure timely execution (Page 10).
→Borrowing limits being increased from Rs. 1,500 crores up to Rs. 3,000 crores to support future project funding and bank guarantees (Page 7-8).

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