PSP Projects faces capped margins despite strong order book execution
PSP Projects Ltd.
SELL
₹970
₹878.25
₹800
17.53%
Investment View and Recommendation
ICICI Securities retained its SELL recommendation on PSP Projects in its July 31, 2026 result update, while also stating that it is dropping coverage to optimise resources. The broker’s central concern is that, despite healthy execution supported by a large order book, the company has been unable to recover its earlier profitability levels.
ICICI Securities expects consolidated EBITDA margin to remain capped at 7–7.5 per cent, which it believes will constrain return on capital employed and return on equity.
Business Profile and Order Book
PSP Projects is an India-based construction company providing construction and allied services for industrial, institutional, government, government residential and residential projects. Its construction presence spans Gujarat, Rajasthan, Karnataka, Uttar Pradesh, Maharashtra and New Delhi. The Adani Group holds 34.4 per cent and forms part of the promoter group.
The order book stood at Rs 13,245 crore, down 1.5 per cent from FY26 but equivalent to 3.8 times trailing-twelve-month revenue. Management indicated that the Adani Group could represent 70–75 per cent of the order book. Of the Rs 630 crore of new orders received during Q1 FY27, 93 per cent came from the Adani Group, which the broker characterises as low-margin orders.
Q1 FY27 Financial Performance
| Metric | Consolidated | Standalone |
|---|---|---|
| Revenue | Rs 853.5 crore, up 65% year on year | Rs 785.3 crore, up 53.2% year on year |
| EBITDA / operating EBITDA | Rs 54.8 crore, up 121% year on year | Rs 54.6 crore |
| EBITDA margin | 6.42%, up 163 basis points | 6.96%, up 141 basis points |
| Profit after tax | Rs 18.2 crore; 2.12% margin | Rs 15.2 crore, up 79 times from a weak base |
Standalone revenue growth was supported by execution. The report does not explicitly compare the quarterly outcome with ICICI Securities estimates.
Management Guidance and Margin Outlook
Management maintained its FY27 revenue guidance of about Rs 4,500 crore and its FY27 new-order inflow target of about Rs 6,000 crore.
Management has indicated margins of 6–7 per cent for Adani Group projects and around 8–9 per cent for non-Adani projects. Given that roughly 70 per cent of the order book comprises Adani Group projects, ICICI Securities forecasts EBITDA margin of 7.0 per cent in FY27E and 7.4 per cent in FY28E.
ICICI Securities Estimates
| Metric | FY26 | FY27E | FY28E |
|---|---|---|---|
| Revenue | Rs 2,989.5 crore | Rs 4,221.0 crore | Rs 4,857.3 crore |
| EBITDA | — | Rs 293.9 crore | Rs 358.6 crore |
| EBITDA margin | — | 7.0% | 7.4% |
| Profit after tax | — | Rs 127.2 crore | Rs 175.7 crore |
Valuation and Key Risks
ICICI Securities values PSP Projects at 18 times FY28E earnings per share to derive a target price of Rs 800, versus the report CMP of Rs 970. This implies 18 per cent downside.
The key risks identified by the broker are:
- Lower-than-expected margins.
- Excessive dependence on a single group for orders.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
