This looks like some sort of exchange of the property (Company getting PSP House in lieu of two land parcels to the promoter). I will urge you to get a clarification about this deal from the company.
Outlook Business Magazine dated December 22, 2017 contains coverage/recommendation of this stock by Bhavin Sha ( Founder Sameeksha Capital). Worth reading. This issue is a special edition and contains recommendation / Coverage of 16 stocks.
PSP Project - concall update
Discuss Highlights of Q3 and Nine month Performance
- Q3 Performance
o Company is now awarded with project of “ Surat Diamond Bourse “ which is a single project of 1575 Cr excluding GST .This project include 9 Buildings with Ground+15 floor covering 65 lakh SQ FT construction. This will be the single large complex in the world standing on basement area.
o Company has to complete this whole project in tight timeline of 30 month out of which 2 month has already gone started in mid of November.
o Also get 1 more order of 201 Cr. Total order at this quarter standing at 1776 Cr.
o Orders are received from diversified sector like Government, institution, private, Industrial.
o The other major project awarded include School of Art and Science for Ahmedabad university.
o There are 3 more projects which are expected to come.
EPC project for injectable unit of Punishka Healthcare is an industrial project
Construction of Corporate house for Punishka Healthcare is a commercial project
o Q3 - Revenue book 770.80 Cr
o Nine Month
• Revenue book 466.15 Cr which is after listing on Stock exchange.
• Outstanding order book as on 31st Dec 2017 is 2745 Cr including 34 major project and spread in Gujarat, Maharashtra and Karnataka.
o Company completed 3 projects in this quarter which increase number of completed project to 97.
o Company also received scope by “Amul Dairy project” in Delhi of about 20 Cr before we complete the unit in Karnataka this show satisfaction of client.
o Company average project price has been shoot up to 116.93 Cr compare to 2.55 Cr in 2012-13
• Revenue 178.80 Cr increase on YOY basis 127 % as compared to previous year Q3 revenue of 75.41 Cr.
• EBITDA for Q3 is Rs 26.63 Cr which has gone 180 % on YOY basis as compare to previous year Q3 of 79.43 Cr.
• EBITDA margin stand around 15.45 % which was 12.52 % in Q3 of previous year. Higher EBITDA margin is possible due to execution of various projects and some of the project supplied by client material also executed this quarter.
• PAT stand at 15.40 Cr which has increased on YOY basis by 106 % which was Rs 7.34 Cr in Q3 of previous year.
• Company achieved PAT margin of 8.73% as compared to 9.13% in previous year Q3
Revenue was 139.55 Cr for Q2 FY18 which has increase to Rs 170.80 Cr in Q3.
PAT increased by 19 % compared to Q2 FY 18. While PAT margin has marginally reduce from 8.75 to 8.70 %.
o Total Work on hand is 2745 Cr as on 31st Dec which comprises of
85 % from institutional project
8 % from industrial project
4 % from government project
2 % from residential
1 % from government residential.
This is to be executed over next 30 month period.
o The outstanding order book of Rs 2745 Cr is distributed over 3 regions :-
91% from Gujarat
5 % executed in Karnataka
4 % of work on hand will be executed in Rajasthan.
o Utilisation Of IPO Money which was 167 Cr raised by company
63 Cr being plan to be utilised in goods and capital which is fully utilised by end of Q3
52 Cr kept for CAPEX out of which 17 Cr is utilised for purchase of machinery and shipping material.
26 Cr allocated for General Purposes out of which 17 Cr is utilised till the end of Q3
- How much revenue did company book from Surat project till now?
o Company has not booked any revenue till date because it is no stage of execration so in January company will complete the basement and start PCC and water proof treatment So some revenues has to come in January and February.
- How much revenue company expecting from Surat project in Q4?
o Probably 30-40 Cr from the project of Surat.
- On margin front our supply cost and employee cost has come down so what can we expect in next year when surat project will start kicking in full swing ?
o Margin will depend on tenders so company expect same margins which is coming from past 3 quarters. It will be in 12-15 % range.
- Is working capital stable including payable and receivable?
- Any new big order in pipeline?
o All pipeline projects have been disclosed and company will get 200-300 Cr range project in every quarter.
- Any key project company is focussed on?
o Key project include power project of torrent pharma and torrent power project and Company is already prequalifying stage in college project for IIT Ahmedabad .
- What are the criteria for recognising revenue on projects?
o It is based on quantity wise not phase wise. Every month company will put bill on quantity and get the payment. Real execration was started in December in surat project and in December we can’t do the expected quantity so company didn’t placed the bill. Also there is a criteria of placing minimum bill of 20 Crore rupees. So now it will be easy to bill and recognise revenue because multiple activities are running on the project.
- In the first phase Debtors were too high and management told that it is because of GST issue has that number normalised?
o It will normalised in the second half of the year. There was a confusion of finalising GST rates at that time in which company now getting bill cleared at every month and everything is now cleared. So trade receivable number will come down from next quarter.
- In current order book what will be the portion of order with material?
o About 14-15 crore project are without material rest all are with material. So it is very minimal.
- How big ability can be there to participate in bid?
o For government and institution projects company’s ability is 500-600 Cr. In private or corporate type of projects, we recently qualified for 1675 Cr Diamond Bourse project. So it depends on what type of project it is.
- Can company increase internal capability like 2000-3000 Cr revenue a year and what kind of resource will be mobilised?
o Company has started with 28 Cr in 2006 and come to 600 Cr in 2018. Gradually company is expanding to 30-40 % and will maintain it by increasing man power. For a construction company to expand is more on execution. It is more important about the top management resources rather than capital and machinery.
- What amount of working capital requirement company see in a year?
o Mostly company is working with corporates groups and private sector there is clause of mobilisation of advance of 10 % so that itself is more than sufficient for working capital. Rest require is Bank guarantee which company has already reach to 410 Cr banking facilities.
- How company see competitive intensity?
o The type of projects, type of name company get in market like Ahmedabad and Gujarat company is known for quality. There is a big vacuum in project from 25 Cr to 100 Cr. L&T and Shaporji both company bid for 100-200 Cr projects so they cant focus on small size projects. So as far as delivery time and quality is concerned there is no big competition for smaller size projects.
- How many active sites company have and how it is compare to year ago?
o Presently active sites is 34 and now when company is getting large size projects so company is trying to reduce project of 25 Cr in Ahmedabad , out of Ahmedabad company has limited it to 50 Cr, out of Gujarat company has limited to 100 Cr… Probably in future it will be in a range of 20-25.
- How difficult it is to find high skilled manpower in Ahmedabad that would be used to working on these kinds of projects?
o It is all about training your own people and getting them experience of about 4-5 years within the company and putting them on larger size projects has given good example all the time working well. It is about company culture and company system. Company believe to train own people rather than getting people from market.
- Is company avoiding private residential project?
o Company believes that if private residential project is above 100 Crore then it is worth to work for it less than that for example 25 Cr private residential projects then it is better to work in other construction because company will complete it and get easily free from it.
- Why company is not expanding geographically in real estate sector?
o The real estate market runs on selling and openly driven by sell market so it is little risky. As you don’t know the client and developer it will be risky then if they are capable to pay on time or not. Projects in which finance is depend on sell company believe that they should be selective on ground.
- So company will be on net cash basis?
o Yes, company will be on net cash basis only , even if diamond bourse is concern.
- What difference come after get listed on stock exchange ?
o Before listed on exchange company has to pay 40 % margin to bank out of which 30 % is mortgage and 10 % is margin. After listed on stock exchange it has come down to 25 % margin. Even company is getting competitive cost of funding.
- Does company say no to new projects as it grown 3-4 times after getting listed ?
o No company don’t say no instead of that company has divided it to sizeable projects. A project is more than 100-150 Cr of worth company bid for it competitively. It is not like that once we get diamond bourse project company stop bidding. Company always keep on expanding as it was in last 10 years in Ahmedabad also .
- Kindly provide breakup of institutions ?
o Company is working with pharma companies , Industrial , BSE is also there in institutions.
- How company see the competition among private players and residential projects?
o Presently company is based from Ahmedabad so focus is on nearby city. Now company is working for diamond bourse in Surat then after 4-6 month company will get good opportunity from Surat also.
- Is it will true to say that alone 600 Cr revenue will come from Surat diamond bourse project only?
o It depend on work out of 1575 Cr only 600 Cr is structure part rest include phased that is lift and MAP So this portion of 775 Cr can only be done after 18 month once structure is completed. 450 Cr revenue can come then rest will come further.
- Do company see any receivables problem from Diamond bourse project ?
o No they want to make it the largest Diamond Bourse and this project is full with money right now. Out of 100 % land still 10 % is left for some selected people to come later. So company don’t see any problem in it.
- In next year how much top-line company is expecting?
o In FY 19 the projection is in the range of somewhere 900-1000 Cr revenue.
Company is executing the plans fairly well. Looks good at 28x trailing (cmp 485) with projects lined up for next 30-36 months. They are saying that company will remain net cash positive despite executing large surat project. I am sure working capital needs will rise gradually. Despite 10% advance and reduction in margin money from banks, they need to put receivables under check. If they manage well, this will be a long term growth story. If they flutter on receivables and working capital, they will be like numerous other small sized builders.
It is good that they are focussed on a few cities. Saves on expenses and working capital. Spreading too much without much mgmt bandwidth can be messy. They were focussed in Ahmedabad… now doing that in Surat.
Disclaimer: Invested from 260. Traded positionally many times.
Thanks mate for the summary.
Did they mention how much is the actual difference in numbers?
Did they mention when the rest of the IPO money will be utilized? Will they do more capex for Surat project?
As a fallout of the PNB scam, funding for construction of the Surat Diamond Bourse might be delayed. This will have an impact on PSP revenue visibility in the near term.
Sir, any basis for apprehension in funding, when company says project is sold with and 90% land sold, 10% reserved. Regards
Tarun Advani: Understood, Sir do you see any challenge for example if we keep on billing say Rs.40 Crores,Rs.50 Crores every month, what is your view on how the receivable would shape out, do you PSP Projects February 08, 2018 think that the client would have enough money to timely pay us and our working capital wound
not get stuck?
The basic idea of this old Diamond Bourse if you have gone through the history of this Diamond
Bourse, they are going to create this as the one of the largest infrastructure Diamond Bourse
industries coming up and you will not believe about this total area of 66 lakh square feet, they
have sold 90% of the sales, 10% they have kept reserved for some selective persons to come
later, so presently if you see that the project is fully with money, so this is all depends on how
fast I did go and how fast they get the payment from the tenant so I do not see any problem in
terms of receivables as far as SDB Association is concerned.
When a project is sold, it means tenants have committed to purchase an office and paid booking amount with an agreement to pay the rest based on certain construction milestones. Tenants enter into these type commitments based on projecting their own business growth and cashflows. This is similar to someone buying an under construction house.
Some of these tenants may get into trouble if working capital funding to diamond industry is reduced by banks as a result of PNB scam. Some tenants might have to pay higher interest rates to fund their working capital which will affect their profitability. Since industry is so heavily dependent on working capital, any disruption there can have ripple effects and buying a new office would be the last priority of such businesses.
This is a large contract for PSP and any change in delivery schedule will impact PSP results. company has hired several employees, made investments in machinery and already spent few months of efforts on this project. As per Mr. Patel, initial construction activity generally does not result in much billing so that will have an impact even though it will be limited. Any delay in billing will impact bottom line since company is already incurring expenses for this project.
I had written to company last week about construction update and this is what I received.
Dear Sir, With reference to your query, it is hereby informed you that Construction activities are going on at the site of Surat Diamond Bourse. Further, with regards to PNB scam on funding of Surat Diamond Bourse Project, We can say that we do [NOT] have any indication from our client which shows such impact on execution of the projects at present. The construction activities have not been delayed or hampered due to this element. It is also hereby informed you that payment are being released timely till now. I trust I have explained the matter to your satisfaction. Regards, Minakshi Tak Company Secretary & Compliance Officer cid:[email protected] PSP Projects Ltd. ‘PSP House’, Opp. Celesta Courtyard, Opp. Lane of Vikramnagar Colony, Iscon-Ambli Road, Ahmedabad – 380058 Office: 079-26936200/6300/6400 Email – [email protected] URL – www.pspprojects.com
However, it will be too early to see any impact and the potential impact (if any) will play out over next one year.
Thanks for clarifying got the point .
Has anyone seen the PSP results? I managed to grab a few minutes to make a table. comments appreciated.
PSP results. I think the results are quite good. The rise in profits is only 12% vs sales rise of 60% due to increase in subcontracting costs. I think the sub contracting costs may have gone up due to the breaking ground on the Surat project and will come down over the next 2-3 quarters. What I like is that the construction costs have been well contained. I think the worst of the expensing is done with and next quarter on he will make money. Notably, if I keep subcontracting costs to past years level as % of sales, the PAT would have gone up by 110%.
Interestingly, the consol FY18 Sales and PAT came in at Rs770 crore and Rs66 crore respectively. This is sharply ahead of the estimates made in a recent (30th April) Edelweiss Report on the company of Rs667 crores and Rs57 crores.
Writing in a hurry to excuse any typos, please do let me know what you think of the results.
Overall good results from PSP Projects.
Source: Company Presentation
Strong revenue growth for Q4 as well as FY 18. This is due to SDB project getting accounted for in Q4. As previously mentioned by the company, expenses are higher at the start of the project and margins are lower so that is visible in the Q4 results.
FY 18 results show a strong revenue growth, good EBITDA and PAT margins. FY 19 should see a strong revenue growth and some uptick in margins are costs are front loaded.
Company has a strong order book of 2,559 Cr which is 3.5 times FY 18 sales. Order book has dipped by about 186 cr from Q3 to Q4 and number of projects under execution is same at 34. Since SDB is a large project, company is not adding any more projects at the moment.
Source: Company Presentation Q2
Source: Company Presentation Q3
Source: Company Presentation Q4