Hi @hitesh2710 sir,
Do you happen to track PSP Projects? The company has been showing significant growth (30%+) over multiple quarters consistently. And the SDB project looks to be on time for completion opening up the pre-qualification credentials for the company to projects greater than 1500 cr. in addition to their strong current order book (with a lot of repeat clients indicating strong customer loyalty) with strong revenue visibility for at least 2 years.
ROCE looks good at 40%+ and the company has been adding on-contract and direct employees at 30-40% increase every year. They’ve also recruited middle management folks from premier construction institutes like NICMAR, which is a plus for a company of its size.
One of the companies in the sector with negligible debt and the company has handled WC well (although in the concall, there was warning that there could be a manageable increase in WC in coming quarters due to bulk of SDB getting completed). Most clients are institutional or industrial which give advances and allows the company to manage without expanding WC. The company takes up government projects only when there is significant prestige or complexity attached to it, like Gujarat Assembly building or the AHP building in Maharashtra.
Most of the capex has gone into adding a captive equipment bank instead of having to lease construction equipments. Company has also added integration with MEP (Mechanical, Engineering and Plumbing) and Interiors recently becoming a one stop solution for its customers.
Few other positives are the reduction in the corporate tax rate from 35% to 25% - which due to the company’s not insignificant pricing power could possibly retain. Also, the promoters have been buying significant sums from the open market over the past couple of months.
Possible risks include geographical concentration risk, which the company is looking to de-risk by venturing into projects outside Gujarat. And the middle management bandwidth to handle multiple large orders concurrently as the company grows in size.
Requesting you and other forum members to share your thoughts on the investment thesis, or if anything is wrong with this story. Thank you.
Disc: Invested.