Hello Sir,
Hope you are doing well.
You know what’s the best part about investing in stocks without taking leverage is – Asymmetric payoffs.
If the process is right, stocks can go up 2x, 5x, 10x or much higher while the max you can lose on a stock is 100%.
Thus, if you focus on basics: business growth, reasonable valuations, promoter’s skin in the game, low portfolio churn, diversification, in the long term it’s highly unlikely one will not do well.
In line with our above philosophy, we keep scanning through 100s of stocks to invest in few good stocks.
Recently, I was looking at PSP Projects.
The company is known for constructing the World’s biggest office space, Surat Diamond Bourse. The company has also been recognized as the second fastest growing construction company in small category in India a few times.
The numbers of the company have been decent with good growth in sales and profits over the years.
Below, we have shared notes from Q3 FY 24 con-call of the company.
2 New stock recommendations
- 1 Long/medium term investment recommendation – Change in management, strong growth outlook of 15-20% over the next few years and reasonable valuations
- 1 Special Situation opportunity – Changes in ownership, Well known investor invested in the stock, Open offer price may help protect downside, management aiming double digit growth
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PSP Projects – Notes from Q3 FY 24 con-call
– Business
- The company has entered into bidding for larger projects across different states in India
- They are looking to move up the value chain and take on higher ticket size projects
- The bid book now includes projects in Madhya Pradesh, Odisha, Delhi, and Uttar Pradesh
– Projects and Order Book
- During Q3FY24, the company completed 7 projects
- During Q3FY24, the company was awarded 2 projects
- The outstanding order book was Rs 4,443 crore, a decline of 12% on a year-on-year basis
- The bid pipeline is in the range of Rs 6,000 crores
- Out of the outstanding order book, private projects comprised 49% while government projects comprised 51%
- As on 31 December 2023, there are 49 ongoing projects, 87% of which are based in Gujarat and 13% in Uttar Pradesh
– Surat Diamond Bourse
- The company has filed a Commercial Civil Misc. Application seeking interim measures
- They are requesting injunctive relief and an order directing the Respondent to deposit Rs 538.59 crores along with interest
- There are disputed claims of Rs.140 crores which are part of the Rs.532 crores total claim
– Capital Expenditure
- During the period of 9 months, the company has incurred a CAPEX of Rs. 142 crores, out of which Rs. 74 crores is for precast facilities
– Balance Sheet
- As on December 31, 2023, the company has total fixed deposits of Rs. 257 crores, out of which Rs. 47 crores are lien-free and Rs. 210 crores are under lien with Banks for credit facilities
- As on December 31st, long-term borrowing is Rs.75 crores and short-term borrowing is Rs. 403 crores which includes FDOD facility utilization of Rs. 60 crores
- The increase in debt started in March 2022 and is mainly due to the Surat Diamond Bourse project and later the projects of UP
- If the Surat Diamond Bourse case goes to arbitration for an additional year, they will need additional money to manage working capital
– Promoter shareholding reduction
- The promoter shareholding has been reduced from 74% to 66.2%
- Shareholding reduction due to personal requirement
– Guidance
- The company expects revenue to be in the range of Rs. 2,500-plus crores for FY’24 and around Rs 3,000 crore for FY 25
- They expect a margin of 11% to 12%
(End)
Disclaimer: This is not a recommendation to buy/sell PSP Projects. The securities quoted are for illustration only and are not recommendatory.
Best Regards,
Ekansh Mittal
Research Analyst
Web: https://www.katalystwealth.
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